PRR and Lettings relief – changes from 6 April 2020

PRR and Lettings relief – changes from 6 April 2020

Private Residence Relief (“PRR”) and Lettings Relief – Changes from 6 April 2020

In the 2018 Autumn Budget, the Government announced several changes to PRR and Lettings Relief. The changes will apply to disposals made on or after 6 April 2020.

The Current position

Currently property owners who sell a dwelling which at some point was used as their only or main residence, are entitled to claim PRR from capital gains tax (“CGT”) for the period of occupation.  In addition, the final 18 months of ownership is also treated as a period of occupation regardless of the use of the property.

Furthermore, if the property has been let prior to sale then Lettings Relief is also available to reduce any gain.

Proposed changes

Following the Autumn Budget, the following changes have been announced.

The final period of exemption will be reduced from 18 months to 9 months. People who are disabled or live in a care home will not be affected by this reduction and their exemption period will remain at 36 months.

Lettings Relief is expected to be available only where the owner has shared occupancy with the tenants (i.e. the owner and the tenant both live in the residence).

Compliance

The Government has legislated to amend the reporting and payment obligations of UK resident taxpayers. From 6 April 2020, UK resident taxpayers (both individual and trusts) who dispose of a UK residential property, must file a CGT Return and pay an estimate of any CGT due within 30 days of completion.

If you have any queries on the changes detailed above, or would like to discuss any of the points in more detail, please contact your usual Kilsby Williams contact.