Landlords are being warned by the Association of Taxation Technicians (ATT) that if they have previously lived in a property that they let, then potential
changes to the Finance Bill this year could increase their capital gains tax (CGT) bill significantly.
The ATT is urging for changes to avoid this ‘cliff-edge’, as changes to the Finance Bill could lead to an increase in landlord’s CGT bills of up to £11,200.
Letting relief is currently available to those who have lived in a property at one time during their period of ownership, but that have since moved out
and let the property. This relief can cover up to a maximum of £40,000 in gains arising during this period but is only available until 5 April 2020.
If the proposed changes are implemented on 6 April 2020, then letting relief will only be available in situations where the landlord and tenant are living
in the property at the same time.
The draft legislation states that the requirement for ‘shared occupation’ will apply to future lettings as well as any let periods prior to April 2020.
Michael Steed, Co-Chair of the ATT’s Technical Steering Group, said: “Someone who was entitled to the maximum letting relief under the old rules but sells
on 6 April 2020, could be up to £11,200 worse off than if they had sold a day earlier on 5 April 2020.
“At the same time, they will also be subject to new rules – which have already been legislated – requiring them to pay that tax much earlier than they
would have previously.”