As safe as houses, firm foundations, bricks and mortar investments; property has long been considered a sound investment and Hall Morrice offers a range of property tax advice specifically for landlords or those with second properties.
That’s why we’re speaking up about changes to tax breaks that are looming large. Principal Private Residence (PPR) relief has been a valuable tax break that an individual receives when a capital gain is realised on the sale of his or her only or main residence.
From April 2020 the rules change on two ancillary reliefs, namely lettings relief and final period exemption, which could hit property owners in the pocket by seeing them having to pay more in tax.
The final period exemption for PPR relief is to be reduced from 18 months to nine months and lettings relief will be restricted to situations where the owner was in shared occupation with the tenant.
These combined changes are likely to result in increased capital gains tax liabilities for property owners. This is because the reduction to the final period exemption will reduce the exempt part of the capital gain, thus increasing the proportion of the gain that is chargeable to Capital Gains Tax (CGT) - and changing lettings relief will effectively abolish this relief entirely in most cases.
The Government says the shake-up has been designed to better focus PPR relief to the owner occupier, and it has added an extension of job-related accommodation relief.
At present, people who live in employer provided accommodation, including military personnel living in MOD accommodation qualify for relief which ensures that any gains arising on the property they would be occupying as their main residence (but cannot as they have to reside in work related accommodation) are protected from capital gains tax. This relief is to be extended to military personnel who do not live in MOD accommodation but instead rent in the private sector as part of the MOD's "Future Accommodation Model”.
It’s important for property owners to be aware of how the changes to Private Residence Relief will impact them – and to seek appropriate advice.