The Business Exchange Bath & Somerset Issue 13: Autumn 2019 | Page 35

PROPERTY
Are ‘accidental’ landlords being let down?
Asks Rachael Verinder, Tax Partner at Milsted Langdon.
In the last few years, the property industry has been significantly
affected by changes to taxation, which in many cases has led to
buy-to-let investments being less profitable.
Right now, CGT is not generally paid for the
years that you lived in the property, plus an
additional exemption for the last 18 months that
you owned it, whether you lived in the property
during that time or not.
From April 2020, this final period exemption
will be cut from 18 months to nine months. There
will be no change to the 36 months available to
disabled people or those in, or moving into, a care
home.
One of the most significant changes that will
affect landlords will be the change to Letting
Relief. This currently provides up to £40,000 of
relief (£80,000 for a couple) to people who rent
out a property which currently is, or has been at
some point, their main home. From April 2020,
Letting Relief will only apply where the owner
shares occupancy of the home with a tenant, so in
the most part, this eliminates any benefit for the
typical accidental landlord.
This means that a married couple, for example,
could pay up to an extra £22,400 if they sell their
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property after April 2020 purely on the removal of
Letting Relief, resulting in many choosing to sell
sooner rather than later.
Another change to consider from April 2020
is how CGT is paid on a second home. Taxpayers
will now have 30 days to file their return and
make an advance payment towards their tax bill.
This differs from the current rules, which allow
people to pay CGT on the disposal of a property
up to 22 months after the sale as part of the self-
assessment cycle.
Rachael Verinder, Tax Partner at Milsted
Langdon, said, “The benefits of being a landlord
are about to change again quite significantly and
landlords may face much higher tax bills when it
comes to selling their properties.
“It is therefore vitally important that landlords
seek out additional help to ensure that their
portfolio of properties remains as tax efficient as
possible.”
For expert advice on all tax issues, contact our
team of tax specialists.
Rachael Verinder,
Milsted Langdon
However, just as landlords and investors are
getting up to date on these changes, HMRC has
outlined new rules which will see those letting out
a property facing a much higher tax bill when it
comes to selling their properties.
From April 2020, changes to Private Residence
Relief (PRR) and Letting Relief (both of which
can be used to soften the impact of Capital Gains
Tax) will see so-called ‘accidental landlords’ hit
the hardest. Accidental landlords are much more
common these days and include for example,
those who have separated from a spouse or
moved in with a new partner, or relocated for
work, who either didn’t want to sell their property
immediately, or were unable to find a buyer.
When a property is sold, there may be Capital
Gains Tax (CGT) to be paid if it has been let out.
The amount due depends on how long the owner
lived there. Tax is paid on your ‘chargeable gain’,
which is your gain minus any tax relief such as
PRR. PRR is the tax relief that keeps most main
homes free from CGT.
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THE BUSINESS EXCHANGE 2019
35