Tax Changes Affecting Landlords

Fri, Jan 17, 2020

Important Tax Changes Affecting Landlords - Are you Aware?

Landlords, investors and second home owners selling their properties are likely to be affected by significant tax changes coming into effect on April 6th this year.

There are key changes to the payment of Capital Gains Tax, normally payable by individuals (not companies) on any profits made on the sale of a property that isn’t their main residence.

Where these would formerly have been declared on your annual self-assessment form and therefore any tax become payable by the end of January in that tax year (i.e. CGT on sales completing by 5th April 2020 would not be payable until January 2021), from 6th April CGT will now be payable within 30 days of completion of the sale, based on a provisional calculation of your profit. If this results in an overpayment – perhaps because a chance in your income over the financial year affects the rate at which you pay tax -  a refund won’t be made until the relevant tax return for that year is submitted.

Changes will also come into force on Private Residence Relief (PRR) and is most likely to apply to landlords who used to, but no longer, live in the property they’re renting out. At present tax relief is given on the last 18 months before the property is sold whether or not you lived there at the time  – this will now be shortened to 9 months. This means that if you moved out of the property nine months or more before the sale completes the profits could be subject to Capital Gains Tax (a longer period of 36 months may apply where the owner has moved into a care home or is disabled). Those who qualify for Lettings Relief, which potentially allowed a deduction of up to £40,000 against CGT, will also now only do so if they are sharing occupancy with the tenant when the property is sold, which will impact most obviously on buy-to-let investors.

If the sale of your property is likely to be affected by these changes you need to ensure funds are available to pay the potentially higher costs within the new shorter time frame.

These are simplified explanations, of course, and if you’re in the process of selling a property you think might be affected by this legislation, or plan to in the near future, we strongly advise that you speak to a qualified Independent Financial Advisor or tax specialist.

Changes to tax liability are just a few of the pending new legislations affecting lettings properties this year, and we’re acutely aware of how easy it is for private landlords to overlook or misinterpret their implications.

It’s our job to know exactly what’s happening and when and how you need to respond. When we manage your rental property for you we make sure you do too.

Speak to us on 0330 22 11 222 and learn how our Property Management team can help – can you afford not to?