Changes to Principal Private Resident’s tax treatment from 6th April 2020

Now that the summary of responses on the Government’s Principal Private Residence Relief consultation has been published, we wanted to take the opportunity to confirm the taxation reforms that are coming into effect on 6 April 2020 in relation to disposals of property that have at some time been your Principal Private Residence.

Currently, the final 18 months of ownership are treated as a period of deemed occupation. This exists as a means of providing relief from capital gains tax during the time when the owner is trying to sell a property, having already moved into another.

However, under the tax reforms this period of deemed occupation is to be reduced from 18 months to 9 months. This reduction in deemed occupation means that the sale of a property that you previously resided in could be subject to an increased tax charge if sold from April 2020 onwards. This may be particularly problematic for couples who are separating or divorcing.

A further change that will take effect on 6 April 2020 is in respect of the availability of lettings relief. Lettings relief is available where a property, which has been the owner’s principal private residence at some time, is let as residential accommodation to a tenant during a period of the owner’s absence.

Until 5 April 2020, lettings relief may be available to reduce a chargeable gain by up to £40,000 per owner (£80,000 per couple). However, from 6 April 2020, lettings relief will only apply in circumstances where the owner of the property is in shared occupancy with a tenant.

If you are concerned about how any of the changes affect your tax position and would like our assistance in quantifying thisplease feel free to call us on 0161 832 4451 or drop us a line mail@jackross.co.uk.