• Alex Howard

Countdown to restriction of letting relief and final period exemption

No capital gains tax liability arises if a gain occurs on the sale of a property which has been the owner’s only or main residence throughout the period of ownership then the gain is fully sheltered by private residence relief. However, there are advantages to be had if the property has been the only or main residence for part of the period of ownership – not only is that period covered by private residence relief but the door is opened to benefit from the final period exemption and, where the property has been let, lettings relief.

However, time is running out to benefit from these reliefs in their current, more generous, form.

Final period exemption

The final period exemption extends private residence relief to the final period of ownership where the property has been the owner’s only or main residence at some point in the period of ownership. Until the end of the 2019/20 tax year, the final 18 months of ownership is exempt. However, from 6 April 2020, this is halved to nine months, although, as now, it will remain at 36 months where the owner is disabled or goes into care.

Where a sale is on the cards, completion before 6 April 2020 will keep the last 18 months of ownership tax-free as long as the property has been the only or main residence at some point.

Lettings relief

As it currently applies, letting relief can reduce the chargeable gain on a property that has been let and which has been the owner’s only or main residence at some point by up to £40,000. The relief reduces the chargeable gain by the lower of:

· the gain attributable to letting (usually, the gain not sheltered by private residence relief)

· the amount of private residence relief available

· the gain attributable to letting

Lettings relief is being curtailed from 6 April 2020 and for properties disposed of after that date, it will only apply where the landlord is in shared occupancy with the tenant. So, if you own a property in which you live as a main home and subsequently move into a new home retaining the former home which you let out, you will not qualify for letting relief if you dispose of the property after 6 April 2020. Combined with the reduction in the final period exemption, the tax bill for post 6 April 2020 disposals may be significantly higher than that for disposals before 6 April 2020.

Consider selling before 6 April 2020

If a disposal is on the cards and you currently would benefit from lettings relief and/or the final period exemption, where possible aim to complete before 6 April 2020 to enjoy these reliefs in their current, more generous, form.

If you have any questions on this topic or are considering a change of Accountants, please give us a call and we would be more than happy to assist you.

4 views0 comments

Recent Posts

See All

Business Rates Update

The government is currently undertaking a fundamental review of the current business rates system, including ideas for possible change and a number of alternative taxes. Conclusions and any changes ar

Recent Issues For EMI Schemes

When it was first introduced in 2000, the Enterprise Management Incentive (EMI) scheme had an initial life expectancy of around five years, but arrangements proved to be so popular with employers and

What Tax Do I Need To Pay By 31 January 2021?

The self-assessment tax return for 2019/20 must be filed by midnight on 31 January 2021. If you miss this deadline, you will automatically receive a late filing penalty of £100, regardless of whether

Howards Accountants is a trading name of Howards Business Services Ltd. Howards Business Services Ltd is registered in England and Wales under Company number 10849750 and the registered office is at Suite 17, Camborne Business Centre, Weeth Lane, Camborne, Cornwall, England, TR14 7DB.

  • Facebook Clean
  • Twitter Clean

© 2019 Howards Business Services Ltd

Alex Howard is licensed and regulated by AAT under licence number 1002975.