22 Jul Lettings Relief – Landlords don’t miss out!
Did you know Lettings Relief is coming to an end in April 2020? Selling a property you once lived in and have also let out before this date could save you thousands in capital gains tax!
If you own and rent out a property that you once lived in you may be able to take advantage of Lettings Relief when you come to sell the property but only until April 2020 after which date the relief will be withdrawn by the government.
The number of months added on to your ownership when considering Private Residence Relief is also falling from 18 months to 9 months.
Sell in August 2019
Isaac bought a house for £150,000 in January 2000 which he lived in as his main residence until January 2010 (10 years) and he then let the property until June 2017 (7.5 years) and went on to sell it in August 2019 for £250,000.
In this example Isaac would have a capital gain of approx £2,500 and pay NO capital gains tax as this would be covered by his annual exemption.
Sell in August 2020
If Isaac didn’t sell his house until August 2020 he would have a capital gain of approx. £47,500 and therefore if he was a basic rate payer a capital gains tax bill of approx. £6,400 or if he was a higher rate tax payer then a tax bill of approx £10,000.
As you can see the removal of Lettings Relief as well as the reduction of months added on when calculating your Private Residence Relief can have a big effect on the capital gains tax you would have to pay. If your tenants have recently given notice or you know the property requires considerable expenditure in the near future you may want to consider making use the lettings relief whilst it is available.
If you need help considering the impact of lettings relief and whether it is better to sell your property sooner rather than later then please contact us.