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The budget has largely been positive this time around, with a hike in the tax-free allowance and more money earmarked for the NHS. Landlords were mostly overlooked by the chancellor for a change. One item of interest in the budget, however, was the loss of lettings relief for people who rent out their former home…
Loss of Lettings Relief
At the moment, landlords can claim lettings relief when they sell a rental property that was previously a family home. They can claim up to £40,000, which saves up to £11,200 in capital gains tax. It’s a useful tax break and one that many people need when they eventually sell a former home after letting it out.
Philip Hammond has targeted this tax relief in his latest budget and by 2020, landlords will no longer be able to claim it to reduce their CGT bill. The only exception is when a landlord shares the property with a tenant.
Divorced Couples Badly Affected
Property experts are warning the government that couples who hang on to the former marital home after getting divorced will be adversely affected by the loss of lettings relief. It could cost them several thousand pounds in extra capital gains tax if they are unable to sell their property within nine months of separating from or divorcing their former partner.
The chancellor made this statement about the loss of lettings relief:
“We re-commit today to keeping family homes out of capital gains tax… [but] from April 2020 we will limit lettings relief to properties where the owner is in shared occupancy with the tenant, and reduce the final period exemption from 18 months to nine months.”
Many are saying that this latest blow to the private rental sector will encourage even more landlords to head for the nearest exit. From the government’s perspective, it’s a good thing, however, as they stand to generate an extra £150 million by 2024.
Want to know how else landlords have been affected by tax recently? Read these:
