There have been a number of important changes over the past few years not all of which are appreciated by busy landlords. We believe that it would be time well spent to have a review of your current knowledge of the rules and the past and proposed changes. Please contact us if you would like an appointment to discuss.

The main changes:

~ Proposed changes to Principal Private Residence Exemptions and Lettings Relief (expected March 2020)

HMRC have proposed a reduction of the PPR exemption for the final period of ownership from 18 months to 9 months and the restriction of relief for letting to circumstances where the owner of the property is in shared occupancy with the tenant.

The proposal may increase tax due by shortening the ‘exempt from tax’ period for proportioning of gains and by the removal of the ‘lettings exemption’ which can be up to £40,000.

If you are considering selling such a property in the near future, please contact us to discuss. A recent case showed that a client could save up to £14,000 in Capital Gains Tax by selling a property before the changes ‘proposed’ after March 2020.

~ Rates of Capital Gains Tax on sale of residential property

Whilst capital gains tax rates in general were reduced in 2016/17 to 10% / 20%, the tax rates for residential properties remain at 18% / 28%.

~ Notification to HMRC of sale of property (proposed from 6th April 2020)

Capital gains tax (CGT) is normally accounted for and paid as part of the annual self-assessment cycle. From April 2020, a payment on account of CGT will need to be made when a residential property is sold or otherwise disposed of (e.g. by giving it away). The payment will be credited against the person’s income tax and capital gains tax liability for the tax year. Payment will be due within 30 days of the completion of the disposal.  A special payment on account return confirming the disposal and the amount payable will also need to be sent to HMRC at the same time.

~ Changes in tax relief for mortgage interest (being phased in from 2017/18)

Landlords paying higher rate income tax are no longer able to deduct all of their mortgage interest/finance costs from their rental profits. Instead, they receive a basic rate tax reduction. The restriction is being phased in as follows:

2017/18 75% allowed against rental profits, 25% available as a basic rate tax reduction

2018/19 50% allowed against rental profits, 50% available as a basic rate tax reduction

2019/20 25% allowed against rental profits, 75% available as a basic rate tax reduction

2020/21 0% allowed against rental profits, 100% available as a basic rate tax reduction

~ Repairs and replacements deductions (introduced 6th April 2016)

HMRC removed the ‘wear and tear’ allowance at the end of 15/16.

See the links below for what you can now claim for:

Expenses you can claim for replacement of domestic items

Typical maintenance and repair costs