News

From April 2020, UK residents disposing of residential property in the UK who have capital gains tax to pay must report the disposal and make a payment on account of the tax due within 30 days of completion. This is a major change to the timing for reporting and payment, and coincides with the proposed introduction of restrictions to private residence and letting relief.

Reduction in final period exemption for PPR

Principle Private Residence relief (PPR) gives relief from Capital Gains Tax (CGT) on your home. Currently no CGT is payable on gains arising during periods of actual residence in the property or on gains arising during the final 18 months of ownership, regardless of whether you still lived in the property during that period.

However, from April 2020, the final 18 month exemption will be reduced to 9 months. The current 36 month exemption for those in care homes and people with a disability will not change.

Lettings relief change

Lettings relief is currently available for those who let out a property which is or has been their main residence, i.e. those who are entitled to some PPR relief. The relief available is the lower of: the gain arising during the letting period, the amount of PPR relief claimed, and £40k. However, for all disposals after April 2020 the relief will only be available to those who lived in the property at the same time as the tenant. So if you live on one floor and let out the other, PPR will be available on half the gain, and lettings relief will still be available on the other half.

Example

John lives in a property for 5 years then lets it out for 6 years and 6 months before selling it. If sold currently he would pay no capital gains tax - 5 years and the last 18 months of ownership is covered by PPR and the balance is covered by lettings relief. From April 2020 he would pay CGT on 5 years and 9 months of gains, i.e. the let years, less the final 9 month PPR exemption.