Why changes to landlord CGT mean brokers are worth their weight in gold

by 24/01/2020

It seems there hasn’t been a year go by recently when landlords haven’t been left reeling by some new piece of legislation.

Since 2015, we’ve seen the introduction of the Stamp Duty surcharge, the phased reduction of mortgage interest tax relief and more stringent affordability checks coming into force. And that’s just for starters. There’s also been changes to HMO licensing, the launch of the Tenants Fees Act, the introduction of Minimum Energy Efficiency Standards and the proposed abolition of Section 21.

Now don’t get me wrong. I’m all in support of anything which improves things for tenants, drives up standards and gets rid of those landlords who give the rest of the industry a bad name.

However, amongst all of these headline-grabbing changes I’m concerned that three new tax reforms which were announced in the 2018 Budget and which are due to be introduced on 6th April later this year might have slipped under the radar. The changes could have big implications for landlords and the amount of Capital Gains Tax (CGT) payable if they decide to sell a rented property which they’ve lived in at some point during their ownership.

First of all, lettings relief will be limited to properties where the landlord lives with their tenants from 6th April. Landlords are currently entitled to relief of £40,000 on CGT, even if they don’t live at the property.

Secondly, private residence relief is being scaled back which means that landlords who previously lived in their houses before letting them out will see the period they are entitled to CGT relief cut from 18 months to nine.

Finally, it’s worth mentioning that CGT incurred following the sale of any residential property will now have to be paid within 30 days of the completion date. At present, owners can wait to tell HMRC in their tax return for that tax year, but after 6th April they will need to complete an online return and pay any capital gains due. Failure to pay within the 30 day deadline could result in HMRC imposing interest and potential penalties.

What does all this mean to landlords looking to sell a residential property? Well, to put it bluntly, if they’re considering selling a property after 6th April they may have to pay more CGT.

It’s why brokers who are aware of all the changes happening in the market are worth their weight in gold. It’s also why here at Precise Mortgages we place so much importance on education, not just for our staff but the wider market too. We run regular workshops around the country where brokers can access the information they need, and a member of our Sales Team is never far away if you’ve got a question about any aspect of the sector.

Forewarned is forearmed, so the saying goes, and with so much information for customers to absorb, it’s never been more important to ensure they’re kept up-to-date with the latest developments.

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