Residential Property Tax Changes 2020-2021

Significant changes to tax legislation applying to the disposal of residential property are currently due to come into effect on 6 April 2020.

Residential Property Tax Changes

These include:

A new timeframe for the payment of capital gains tax means this tax will be due and payable to HMRC within 30 days of completion

Capital Gains Tax (CGT) is currently paid generally between 10 and 22 months after the date of sale. From 6 April 2020, CGT will be payable within 30 days of completion. This new timeline for making CGT payments could have an impact on tax planning for many individuals.

 

The automatic deemed final occupation period of ownership for a principal private residence is being reduced from 18 months to 9 months

This change relates to a deemed exemption period. You pay tax on your ‘chargeable gains’, i.e. your gains net of any Principle Private Residence (PPR) relief you are eligible for if you have occupied the property as a main residence at any point during ownership. In effect, PPR relief protects the property you use as your main home from CGT. Currently, there is no CGT if you sell a property that you have lived in, as your main residence, throughout the period of ownership. In instances where you have lived in the property at some point but not for the full duration of ownership, the last 18 months are currently considered to be automatically exempt.

The November 2018 Budget announced a proposed change in the final exemption period with effect from 6 April 2020, reducing it from 18 months to 9 months. Subject to certain conditions the 36 month exemption will still apply for people who are disabled or people selling for the purpose of moving to a care home.

 

Significant restriction on the availability of ‘letting relief’ when calculating capital gains tax payable on the sale of a principle private residence which has also been let during ownership

Letting Relief is available to home owners who rent their Principle Private Residence (PPR) during their period of ownership. Typically, PPR relief would be claimed for the period(s) of occupation plus the last 18 months of ownership (see above, due to change to 9 months) and Letting Relief would be claimed for period(s) when the property was let. Since 1980, the latter has been a valuable relief providing up to £40,000 of exemption (£80,000 for a couple) to people who let a property that had at the same time been their main residence.

From 6 April 2020, it is proposed that Letting Relief will only apply where the owner is sharing occupancy of the home with the tenant(s) under the same roof. If the owner moves out of the property and lets it to a tenant, Letting Relief will no longer apply.

 

The changes above are subject to any further change in legislation; particularly given the upcoming election. For more information on how you may be impacted by these changes, please do not hesitate to get in touch with any member of our GMcG Tax Team:

BELFAST

Paul O'Connor

Helen Allen

LISBURN

Christine Harrison

PORTADOWN

Neil Armstrong

The views expressed in this publication represent an outline of the relevant provisions and are not intended to be exhaustive. No action should be taken on the basis of information contained herein in respect of any specific case without obtaining the necessary professional advice. No responsibility for loss occasioned to any person acting or refraining from action as a result of the material in this publication can be accepted by GMcG Chartered Accountants.

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