Clients who are planning to sell or transfer a residential property which has been their main residence, are at risk of losing some CGT reliefs if the transaction is delayed beyond 5 April 2020. Remember it is the date that unconditional contracts for sale are agreed which fixes the sale date for CGT, not the completion date of the transaction.
Lettings relief currently applies to the gain accrued for periods of letting, if the property has at some point been the owner’s main residence. It is often claimed by landlords who let out their former home instead of selling it when they move up the property ladder.
From 6 April 2020 very few sellers will qualify for lettings relief, as the relief will only apply for periods when the property owner was in occupation alongside the tenant. Periods when the property was fully let to tenants won’t qualify. This will retrospectively wipe out any accrued lettings relief for properties which are currently fully let.
This is a significant blow to “accidental” landlords as lettings relief can be worth up to £40,000 per owner per property.
Delay of sale
Many difficult family circumstances such as; divorce, serious illness or relocation of a job can mean the owner has to move out of their home long before it is sold. A downturn in the market could also mean properties take longer to sell. Clients in these circumstances need to be aware that the final period of CGT exemption will be cut from 18 months to 9 months for sales agreed on and after 6 April 2020.
Transfer between spouses
A transfer of a property between spouses or civil partners is always done on a no gain/ no loss basis, and that will not change. However, for transfers made on and after 6 April 2020 the transferee spouse will inherit the exemptions derived from the use to which the property was put during the period it was owned by the transferor spouse.
This could reduce the main residence relief where a let property is transferred to a spouse and it then becomes the couple’s main home.
Written by the Tax Advice Network