Significant changes to property tax are coming next year …
There are widespread confusion and lack of awareness amongst second-home owners of the new rules and obligations.
New rules which will come into effect from April 2020 mean that when a second home is sold, the owner will have to pay the capital gains tax (CGT) due within 30 days. Currently, the CGT must be paid by January 31st following the end of the tax year in which the property was sold. This new 30-day rule is clearly a significantly shorter timescale.
HMRC reiterates that “Private Residence Relief (PRR) is designed to keep out of CGT those gains or losses that arise when a person sells or otherwise disposes of a dwelling that has been used as their only or main residence”. The changes being implemented next April are meant to make PRR more targeted at owner-occupiers. Basically, live-out landlords and second-home owners are in the firing line.
Lettings relief –
- Currently, this applies when a house which was once a person’s main residence is subsequently rented out.
- The reform means from April next year the relief will only apply when an owner is in shared occupancy with a tenant.
Final Period Exemption –
- This policy allows people to have a period of non-occupancy at the end of ownership which is free of CGT. This exemption length is currently 18 months.
- Due to perceived abuse, the exemption length will reduce to 9 months from next April.
We work closely with specialist tax advisers. If you would like some help and advice, the team here at Hartsfield can help. Please get in touch.