From April 2020, the government will be changing two reliefs that provide relief on rental property (lettings relief) and on gains made in the final period of ownership (principle private residency relief) of your main residence.

Lettings relief

This useful relief can be claimed by individuals who have let out their properties, which are or have been at some point in the past their main residence.  Lettings relief currently provides up to £40,000 of relief (£80,000 for a couple).

The relief is changing from April 2020 and will only be available to those who are in shared occupancy with a tenant.  This change will not affect owner-occupiers, as they are occupying the property with their tenant or landlords who have never lived in the property they are renting out, as this relief would never have been available to them in the first place.

Final period exemption

Currently individuals do not have to pay capital gains tax on gains made in the final 18 months of ownership, even if they are not an owner-occupier during that period, as long as the property has been their main residence at some point.

However, a long exemption period means that more relief can accrue on two properties (an unsold one and a new one) at the same time.  HMRC state that this relief is ‘out of line with the intention of the exemption, which is meant to protect those who move to a new main residence but are unable to sell their original home immediately’.

Therefore, from April 2020, the exemption will be reduced to 9 months from the previous 18 months, which in turn was reduced from 36 months from April 2014.  According to HMRC 9 months is still twice the length of an average property transaction, it does make you wonder where HMRC are going with this exemption.  For those in or moving into care homes, and people with a disability, 36 months of exemption will not change.