Plan Ahead to Make Property Sales Less Taxing

March 11, 2019

Measures relating to residential property sales, purchases and ownership that the Chancellor announces in his Budget are always among the most eagerly anticipated parts of his speech.

Phillip Hammond’s most recent Budget in October last year featured two changes to Capital Gains Tax (CGT) on residential property sales that will be coming into effect in the near future.

The changes relate to Principal Private Residence (PPR) relief and will be of interest to landlords disposing of a property which has at any time been their main residence. The changes are effective from 6 April 2020, and could result in some landlords bringing forward their planned disposals prior to this date.

As things stand, gains made on the disposal of a residential property are subject to CGT at either 18% for basic-rate taxpayers or 28% for higher rate taxpayers, but the gain relating to the period in which the owner has occupied the property as their main home is exempt by virtue of PPR relief.

Further to this PPR relief is also available in instances for example, where homeowners move out of their property before contracts have been exchanged for the sale. The gain accrued for such a period when the owner is not occupying the property and a sale has not been agreed would be exempt from CGT for up to 18 months.

The current 18 month extension to PPR relief to cover this last period of ownership was reduced from 36 months in April 2014, but the 36 month period of PPR exemption still stands for owners who move facing specific issues (ie, moving into a care home or having a disability).

In addition where the property is let and has also been occupied by the owner at any time as their PPR, each owner can claim Lettings Relief of up to £40,000 to reduce the taxable gain.

Lettings Relief is capped at the amount of PPR relief due for the given period when the owner was in occupation, or £40,000, whichever is the lower.

The forthcoming changes announced in the Budget aim to:

  • Reduce the final 18 month period currently tax exempt under PPR relief to just nine months.
  • Restrict Lettings Relief to cover only the period where an owner has occupied the property at the same time as their tenants in “shared occupancy”.

Whilst the above changes are currently under consultation, if they are enacted then this will see two very valuable reliefs either restricted or left out of reach from some landlords from the 6th April 2020.

Lettings Relief in particular, has long been viewed by landlords as a generous relief, with the ability to reduce the overall gain arising on the disposal of a property by up to £80,000 for joint owners.

The changes are but the latest made by the Government in its bid to increase the tax taken from residential landlords. Expert advice should be sought when you’re starting to think about buying or selling a property to ensure that the process is executed in the most tax-efficient way possible.

For more information on RMT Accountants’ personal tax services, please contact Chris Moir (Head of Personal Tax) on 0191 256 9500 or visit


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