Not very festive I know (sorry), but in the budget on 29th October several measures were announced, most of which sounded very positive, such as increase in personal allowances and basic rate bands. However, if you’re a landlord thinking about selling your rental property that you once lived in, you could be in for a very unpleasant surprise.

We currently have a relief called “Letting relief”. This applies to landlords who are selling their rental property that they may have lived in once. Maybe they couldn’t sell their existing house when looking to up-size, so became a “reluctant landlord”, of which there are many, and kept the original property and let it out. When this property is sold this particular relief can allow up to £40,000 of the gain to be exempt from capital gains tax, potentially saving £11,200 in tax, so very valuable. This is being discussed, but it is very likely that this relief will be abolished from April 2020 unless you actually live in the property and let out a room.

A further relief called “Principle Private Residence” relief has also been reduced from 18 months to 9 months, again increasing capital gains tax liabilities.

I think this is yet a further blow to landlords who are already facing increasing income tax liabilities from measures previously announced. I suspect we will have a reduction in the number of smaller landlords who simply can’t weather the storm, meaning less choice for tenants. Arguably, this does potentially put more houses into the market for potential private owners, so not all bad maybe, depending on which side of the fence you are.

In short, if you are a landlord in this position and are considering selling in the future then I would advise selling before April 2020.

  • Simon Jilks, Director Ivybridge Accountants