Do you let out a property that used to be your home? If you do, then you need to think about how the following changes in the tax law will affect you when you decide to sell the property.
At the moment, if you rent a property following a period of living in the property, there is a very valuable tax relief called ‘letting relief’ when you sell the property. The ‘letting relief’ reduces any capital gain on your property and therefore reduces the amount of capital gains tax that you need to pay. This can give tax relief on any capital gain of up to £40,000 (or £80,000 for a couple).
However, from April 2020, this letting relief will only apply in some very limited circumstances e.g. where the owner of the property is sharing occupancy of the home with the tenant. Therefore in a majority of cases, where the property is worth more than you paid for it, you may pay a lot more tax if you decide to sell it after April 2020 than if you sell it in March 2020!
These changes apply to you if you answer yes to all the questions below:
- Do you rent out a property that you have lived in previously?
- Is the property worth a lot more than you paid for it?
- Are you thinking of selling the property in the short term?
If you would like us to calculate how these changes may affect you so that you can make a decision about the best time to sell your property then please get in touch and we will be happy to do some draft calculations for you so that you can make an informed decision.