Accidental landlords could face a large tax bill
Earlier this year, the government announced plans to scrap two types of tax relief for landlords who sell a property that was once their home. Homeowners in these circumstances are often referred to as ‘accidental landlords’, as when they originally acquired the property it was not with the intention of letting it out. They may choose to do so because they are having trouble selling, are relocating or they may have inherited it.
The clock is ticking
The new rules will take effect from 6 April 2020 when the tax relief, known as principal private residence relief, will be reduced from the existing extension of 18 months to nine months. So, when a property that was once a main home is sold, the tax payable is on the amount it goes up in value while it is let out. Currently the owner is allowed to add 18 months to the amount of time they lived at that property; from April next year they will only be able to add nine.
Lettings relief is to be scaled back at the same time, meaning that landlords selling their former home after renting it out will no longer be allowed to shelter £40,000 of the gain from Capital Gains Tax (up to £80,000 for couples). From April next year, only landlords who continue to live in the property will qualify for this benefit.
The Financial Conduct Authority does not regulate some forms of tax advice.
|The new rules will take effect from 6 April 2020 when the tax relief, known as principal private residence relief, will be reduced from the existing extension of 18 months to nine months.|