Its essential to understand how these will affect you if you are a landlord or a property investor. The potential penalties can be high if you do not take these tax changes into account when selling a property.
Changes to Private Residence Relief
If you have more than one home, then you are entitled to some Private Residence Relief on your second property. The amount of relief depends on factors, including the length of time the property was your main residence. Currently, the final 18 months of ownership is treated as exempt, and you can get Private Residence Relief.
However, from April 2020, there will be a reduction of the final period exemption from 18 months to nine months. This means that if your property has increased in value from purchase, you will need to pay more on your Capital Gains Tax (CGT) bill when you sell the property.
Changes to Lettings Relief in 2020.
Previously Lettings Relief was available to individuals if at some time they have lived in the property. Lettings Relief which can be up to £340,000 per person, per property is being completely withdrawn.
From April 2020 this relief will only apply if the owner of the property is in shared occupancy with the tenant.
Timescales for paying Capital Gains Tax
In addition to these changes in tax relief for buy-to-let properties being sold, the Government has also changed the timescales for paying Capital Gains Tax. Currently, when you sell a buy-to-let property, you have between 10 to 22 months to pay any CGT due.
From April 2020 Capital Gains Tax needs to be paid within 30 days after completion of the sale. If this is not paid in time, then landlords will be subjected to strict penalties.
Adam Kingswood MARLA stated These reductions in tax relief and now the change to the timescales for paying Capital Gains Tax will have a big impact on landlords and Property Investors. They must get advice to support them with planning sales effectively so they can maximise any tax liabilities and have the funds available to pay the CGT within the 30 days.’
Penalties of £3100 will be incurred by individuals that file their CGT return late. This will increase to 5% of the tax due if the payment is more than six months late.
If you have buy-to-let properties and need any advice on managing the sale of properties, then please do contact us directly by email on email@example.com or call us Nottingham: 0115 704 3163 or Mansfield: 01623 277 115