A capital gains tax (CGT) exemption applies when “an individual disposes of a dwelling that has been used as their only or main residence under the Private Residence Relief (PRR) rules.”
In simple terms, Capital Gains Tax is payable on the disposal of an asset.
The exemption applies if the relevant conditions are met throughout the total period of ownership. This relief is supplemented by ancillary reliefs that aim to deal with other related situations.
The government has previously announced and legislated to reform two of the ancillary reliefs to better target PRR at owner-occupiers. The reliefs which are being amended are:
- the final period exemption will be reduced from 18 months to nine months, although the special rules that give those with a disability, and those in care, an exemption of 36 months will not change
- lettings relief will be reformed so that it only applies where an owner is in shared occupancy with a tenant.
- As present, letting relief allows you to claim the lower of the amount of:
- PPR relief available in respect of the letting;
- the amount of the gain arising by reason of the letting – £40,000.
These changes will take effect from 6 April 2020. The government is now consulting on the changes in more detail and on how they will work in practice. It also invites views on some technical aspects of the PRR rules.
Internet link: GOV.UK consultation
In an article in the Guardian, it also states that if you manage to sell your house before April 2020, your gain will be subject to the current rules. But, because you haven’t lived in the house for the entire time that you owned it, you may still face a tax bill. That’s because only a part of the gain that will be tax-free thanks to “private residence relief”.
It goes on to say “the new rules mean that, as an absentee landlord, the proportion of the gain which relates to the letting of the property and so isn’t tax-free will no longer qualify for lettings relief”
For more information please follow this link https://www.theguardian.com/money/2019/apr/29/im-confused-about-renting-and-changes-to-capital-gains-tax
