Q. I am thinking about selling my previous main residence, which I now let out, what tax reliefs are available to me as I heard there were some recent changes?
A. The Chancellor, Phillip Hammond, announced some big changes in the 2018 Budget to the two main reliefs that are available when an individual sells a previous main residence that they have let out as residential accommodation. These two reliefs are Principal Private Residence (PPR) Relief and Lettings Relief.
PPR relief covers periods of actual occupation as well as certain periods working away from home and up to 12 months prior to moving in to the property if it is refurbished. It also covers the last 18 months of ownership, as long as the property was, at some point, the individual’s main residence.
However, this relief is to change and for any residential properties that are sold after 5th April 2020, the final 18 month period which is generally exempt, is to reduce to 9 months.
Lettings relief is available in addition to PPR relief and is given when a property that has previously been used as a main residence has been let as residential accommodation. The maximum amount of Lettings relief available is £40,000 per person but the actual amount available is dependent on individual circumstances.
In the 2018 Budget, Hammond announced that Lettings relief will change for residential properties sold after 5th April 2020 and will be restricted to only cover periods during which the owner was in ‘shared occupancy’ with the tenant.
These changes could result in larger gains on the sale of residential properties and could have a big effect on the amount of tax due as these gains are chargeable to Capital Gains Tax (CGT) at 18% and 28% for basic and higher rate taxpayers respectively.
It was also announced that the payment of any CGT on the disposal of UK residential properties by UK resident individuals after 5th April 2020 would be brought forward and will be due with 30 days of the date of completion of the sale.
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