Further tax increases for private landlords from April 2020 following changes to the main residence relief

Following the introduction of the increased rate of capital gains tax on disposals of residential properties, the SDLT increased rate on second property acquisitions and the interest restriction for higher rate taxpayers, it seems the Government are continuing to further increase the tax burden on private residential landlords with changes to main residence relief, applicable from April 2020.

For many individuals, retaining your former home and letting this when you move was considered a sound investment. However, the proposed changes include restrictions to the conditions for letting relief so that from April 2020, the landlord will need to be in shared occupation of the property with the tenant in order to claim this. There are no transitional rules for those who let their properties currently and would qualify for letting relief.

The changes also provide that from April 2020, the deemed occupation period for the last 18 months of ownership will be reduced to 9 months. This follows the previous halving of the 36 months to 18 months for disposals that took place after April 2014.

For those who have retained and let their former main residence, these changes could have a huge impact. A sale of the property pre 6 April 2020 that would result in a completely exempt gain could give rise to a substantial gain if sold just the day after, where letting relief is no longer available and the last 18 months is reduced to 9 months. Given the time it takes to sell a property, it is important to consider your options now if you are affected by these changes.

For further information on main residence relief, please contact Gemma Hedges on 023 8046 1259.