Private Residence Relief Changes

Did you know that when you rent out all or part of your home a Capital Gains Tax (CGT) charge may apply when you sell the property? Currently, HMRC exclude the last 18 months of your ownership – even if the property is let for this time – when assessing any CGT liability. However, in a draft of the Finance Bill released earlier this year, HMRC have confirmed that this 18-month period will be reduced to 9 months from April 2020. Disabled property owners, or those in a care home, will continue to be exempt for 36 months.

The Finance Bill also outlines a change to the letting relief rules…

Letting relief is an extra deduction you can make from any CGT payable when letting your home. Under the rules, you can claim the lowest of the following three amounts:

1. The same amount that you can claim as private residence relief. 
2. £40,000. 
3. The same amount as the chargeable gain you made from letting your home. 

From April 2020, you will only be able to claim this letting relief if you are in shared occupancy with the tenant.

Property owners that are considering the sale of their home – which is or has been let for any period - may be advised to complete their sale before April 2020. In this way they will benefit from the 18 month exemption and the more flexible lettings relief.