ATT Concerned at Overnight Tax Hike for Landlords
As I suggested in my previous blog, it’s not always easy to keep track of regulatory reforms or tax changes. However, it remains imperative that landlords have an information source which allows them to keep fully up to date with any policy shifts which may affect them.
With this in mind, I thought it prudent to highlight a recent issue raised by the Association of Taxation Technicians (ATT). The ATT is warning landlords who have previously lived in the property they let that – if changes to letting relief proposed last year are included in this year’s Finance Bill – subsequent measures could increase their capital gains tax bill on a sale by up to £11,200 overnight. This has led the ATT to call for transitional measures to avoid this cliff edge.
Until 5 April 2020, letting relief is available to individuals who have lived in a property at some point during their ownership, but then move out and let the property. The relief can cover up to a maximum of £40,000 of gains arising during let periods.
If the proposed changes released in draft form last year are implemented, from 6 April 2020 letting relief will only be available where the homeowner and the tenant are occupying the property at the same time – so-called shared occupation. Under the draft legislation, the requirement for shared occupation will apply not only to future lettings but also any let periods prior to 6 April 2020. This means that many people who let properties after they moved out will lose any relief they would have been entitled to for those let periods and will have little or no time to take action to preserve it.
This regulatory shift could potentially be a huge financial burden, meaning this is a topic that any landlord should be following closely in the coming months. Especially those who are considering selling a property that they used to reside in.