A leading solicitor at one of the UK’s longest-established law firms has issued a stark warning to property owners, for whom a new ‘game-changing’ second property tax policy could have severe repercussions.
In a press release issued by MFG Solicitors, Gary Priest spoke of the potential implications of the government’s imminent Private Residential Relief overhaul, set to come into effect this month. Ultimately, the reform means that as of this month, those who own more than one home will face a higher rate of taxation when they sell their property.
Landlords are currently able to capitalise on both lettings relief and final period exemption, which will no longer be the case when the new rules come into effect.
Under the current rules, landlords letting out properties which were once their primary place of residence are entitled to capital gains tax relief of up to £40,000. This amount increases to £80,000 for qualifying properties owned by a couple.
However, the new policy scheduled to commence this month will restrict this CGT relief exclusively to landlords who share residency with their tenants.
Final Period Exemption
Additionally, homeowners selling properties they had previously lived in currently benefit from private residence relief, which provides a capital gains tax exemption from all gains generated during the 18 months prior to the sale of the property.
As of this month, this final period exemption will be reduced by 50%, applying only to the nine months leading up to the property sale.
The combination of these two tax overhauls could significantly increase property sales costs for landlords looking to sell homes they previously lived in. All of which has led experts to predict a period of panic-selling over the course of the next few weeks, in order to avoid potentially huge losses.
“With so much commentary around the country’s future in recent months it has been easy for people to have missed this looming change to property tax,” said Gary Priest, in a press release published by MFG Solicitors.
“The lettings relief was effectively a tax break but from 6 April this will be lost. The current arrangements see people receive capital gains tax relief up to £40,000,”
“However, from April if you rent out a property that was formerly your main home, the tax relief will only go to landlords who are physically living in the property with their tenants,”
“It’s a big change and it needs landlords to be financially prepared as owning extra properties may not be so attractive given the financial incentives drop,”
“The only way to avoid the tax change is to sell the property ahead of the April change – an option that I am certain many will seriously consider.”
Ask the Experts…
If you have any questions or concerns regarding your rights or obligations as a landlord, we can help. Aristone Solicitors has unrivalled experience and expertise in all aspects of residential property sales, lettings and taxation obligations for landlords.
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