'Accidental' Landlords Could Face Tax Bill
In early 2019, the government announced plans to curb Private Residence Relief from Capital Gains Tax (CGT) for landlords who once lived in their rental property. Homeowners in these circumstances are often referred to as 'accidental' landlords, because when they originally acquired the property, they didn't intend to let it out. They may be moving in with a partner or struggling to sell it.
Over half a million 'accidental' landlords have until April 2020 to sell, before they could be hit with new tax bills. The rules will take effect from 6th April when the tax relief, known as Principal Private Residence Relief, will be reduced from the existing extension of 18 months to 9 months. When a property that was once a main home is sold, the tax payable is on the amount it goes up in value while it is let out. Currently the owner is allowed to add 18 months to the amount of time they lived at that property; from April 2019 they are only able to add nine months.
Lettings relief is to be scaled back at the same time, meaning that landlords selling their former home after renting it out will no longer be allowed to shelter £40,000 of the fain from CGT (up to £80,000 for couples). From April next year, only landlords who continue to live in the property will qualify for this benefit.
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