Tax advisors, Rita 4 Rent, warn RLA members and the wider private landlord audience to take into consideration important tax aspects of yesterday’s Autumn Statement by the Chancellor of the Exchequer…
Yesterday saw the Chancellor’s Autumn statement, and there were two big changes to the Capital Gains Tax (CGT) rules, which certainly caused a great deal of shock. The first is that from the new tax year, starting 6th April 2014, the 36 month Private Residence Relief (PPR) relief available on certain property sales is to be reduced by 50 per cent to 18 months. This is obviously going to affect a large number of taxpayers, but in the meantime, it does create planning opportunities.
Private Residence Relief is potentially available to you if you sell a property which you have resided in at some point during the period of ownership, as your principal private residence (PPR). You can only claim full relief if you have always lived there during the full duration of ownership. Otherwise, you could potentially claim partial relief. There is extensive law regulating the definition of PPR, including how long you have lived there and quality of occupation.
However, if you are eligible for Private Residence Relief on an investment property, there is good news and bad news! The good news, is that if you sell the property before 5th April 2014, the last 36 months are always exempt, even if you did not live there! And of course you can claim relief for the duration of the period you lived there. The bad news, is that following the Autumn Statement, if the property is sold from 6th April 2014 onwards, only the last 18 months are exempt.
The second change starts from 6 April 2015, whereby non-residents who sell UK residential property, will be faced with a capital gains tax liability. Effectively, this was a ‘tax loophole’ which is now to be closed. So again, it is bad news for the future, but there is time to make plans.
Rita 4 Rent are the recommended tax advisors of The Residential Landlords’ Association, offering specialist tax services to landlords in the private rented sector. For more information visit www.rita4rent.co.uk.