Whitley Stimpson urges landlords to consider action ahead of rising taxes in 2020

Feb 11, 2019

Thousands of landlords could be hit with much higher tax bills when they come to sell their properties, as a result of budget tax changes to be implemented in 2020.

Experts at Whitley Stimpson, one of the largest independent accountancy practices in the area, with offices in Banbury, Bicester, High Wycombe and Witney, says it is important that landlords are aware of these rising taxes as it may be prudent to sell sooner rather than later, thereby avoiding the shock of higher Capital Gains Tax (CGT).

This relates to two changes announced last year – coming into force in April 2020 – that could have a big impact on all landlords, including ‘accidental landlords’: people who have had to relocate for work, or have separated from their partner, or moved in with a new partner, and who either didn’t want to sell up immediately or were unable to find a buyer.

Val Buzzard, a director at the firm, says: “These changes could mean a shock at sale time for owners who have subsequently rented out their homes after once living in them. Those in that position, with equity locked up in that property, are best off selling sooner rather than later if they want to avoid a massive capital gains bill further down the line.”

How much you’ll pay depends on how long you once lived there. You pay tax on your “chargeable gain”, which is your gain (in the value of the property), minus any private residence relief (PRR) you are eligible for. PRR is the tax relief that keeps people’s main homes out of the CGT net.

Currently, you don’t have to pay any CGT for the years you lived in the property, and the final 18 months that you owned it for is also exempt – even if you weren’t living there at the time. This final exemption period will be cut to nine months.

The second change involves lettings relief, which currently provides up to £40,000 of relief (£80,000 for a couple) to people who let out a property that is, or has been in the past, their main home. Under the new rules, lettings relief will only apply where the owner is sharing occupancy of the home with a tenant.

“Currently landlords get PRR for the years they lived in the property before renting it out, and with lettings relief as well this means a reduced tax-bill. Once these changes take effect in April 2020, the maths will look very different, resulting in a much higher CGT. Landlords are going to be worse off”, warns Val.

Whitley Stimpson has a team of specialists who advise on all tax matters for both businesses and individuals. For further details, please contact Val Buzzard, on 01295 270200 or valb@whitleystimpson.co.uk