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Changes to Private Residence Relief

Posted 30th June 2019

Currently if a person sells the residential property they have owned since buying it, any gain should be exempt from capital gains tax.

However, there are a number of rules which effect the extent to which these rules are available to the person in more complex circumstances. In the 2018 Budget the government declared it intends to restrict two of these supplementary reliefs with effect from 6 April 2020. These proposals are at the moment being considered, and are yet to be agreed. However, those property owners who will be affected should consider putting plans in place to avoid the impact of these potential changes.

The proposals are:

  1.  The ‘final period exemption’ would in many circumstances be reduced from 18 to 9 months. This exempts the gain that would arise during the final period of ownership even if the property is not the only or main residence of the person during this time.
  2. Currently ‘lettings relief’ allows the gain on a property which qualifies for the main residence exemption to be reduced by £40,000 where the property was let to residential tenants rather than occupied by the owner for a period of ownership. The proposal is that this relief would only apply if the owner is in shared occupancy with the tenant.

If these changes come into force it will be a further blow to the buy to let sector. Any property owners affected by these proposed changes should seek advice. Please call us to see how we can help.

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