11th Oct, 2019
Throughout 2019 there have been numerous tax changes effecting both landlords and homeowners -- some more drastic than others -- so we wanted to revisit these ahead of their implementation in April 2020.
The biggest and most recent changes were the introduction of 3% stamp duty tax and the restrictions on mortgage interest relief. You may have been thinking that there can't be any more modifications to come in the foreseeable future - unfortunately that's not the case!
So, following the HMRC's recent publication of the draft legislation on the changes, here is a timely reminder of the upcoming amendments...
Principle Private Residence (PPR) and lettings relief ensure that profit made on the sale of a person's only - or 'main' - home is not subject to the capital gains tax (CGT) rule. This covers the period in which the house was occupied and also provides relief for other time frames of non-occupation -- including the final 18 months of ownership.
This 18-month window is a useful time to allow those who have moved out of the house to sell it. But, as from April next year this time frame will have halved to just nine months. The special rules for those with a disability or moving into care will not change.
However, rather strangely, the 36-month period to sell your former property for the purpose of reclaiming stamp duty land tax (SDLT) still applies. In an age where streamlining and simplifying is important, it can be a little confusing that there are two policies in place, rather than one.
In addition, as of April 2020 there will also be a change to lettings relief. It will only apply in narrowly limited defined circumstances, where the owner shares occupation of their home with a tenant. In reality, this will leave this policy redundant. It's important to note, there is also no transition time, meaning periods of letting before April 6 will automatically fall into this new rule.
Furthermore, there will be a shorter window of 30 days for individuals to report the disposal and pay the residential property gains tax -- this begins after the completion of the sale, not the contract.
Before we know it, it will be the new year and these changes will have taken effect in the marketplace. So, it's important to get brushed up on and prepare for this now to ensure no nasty surprises catch you out.
If you'd like any more advice or detail on this from us, please feel free to get in touch with one of our reliable team members here.
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