Landlords hit by the Budget

When you sell a property, you may have to pay capital gains tax (CGT) if you have let it out. How much you pay depends on how long you lived there. 

You pay tax on your “chargeable gain”, which is your gain, 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. At the moment you don’t have to pay any CGT for the years you lived in the property, plus an additional exemption for the final 18 months that you owned it, even if you weren’t living there at the time. But Hammond announced that from April 2020 this final period exemption will be cut to nine months.

The other change is arguably a bigger deal and involves something called 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. From April 2020, lettings relief will only apply where the owner is sharing occupancy of the home with a tenant – effectively spelling the end of this perk.