During last week’s Budget speech, the Chancellor made reference to changes in PRR (Private Residence Relief) set to take effect in April 2020.
What may sound like a minor change to the rules when a landlord sells their investment property may actually result in a considerable cut in revenue.
Previously, landlords have been able to claim PRR if they have at one point lived in the investment property themselves. However, from April 2020 it seems PRR will only apply if the owner is sharing occupancy of the home with the tenant. Clearly this will apply to very few people so the PRR second home benefit is effectively being removed altogether.
If you were selling your investment property today, PRR would provide up to £40,000 relief (£80,000 for a couple) as long as it has previously been their main home. Currently landlords do not pay CGT (Capital Gains Tax) for the period they occupied the property, plus an additional 18 month exemption period that they owned it. This used to be a three year exemption period, yet is about to be reduced further to just 9 months.
As a result, it is fair to assume that property owners will be more reluctant to vacate their home before any sale which could in turn slow this section of the housing market, or to leave the property vacant for extended periods.
We might also consider that a landlord who has lived in the property themselves, where there is likely to be a large capital gain, may be inclined to sell before the new rules come in.
If you would like to discuss your own position in relation to the above, please feel free to call Rebecca Howland on 01530 271313, or pop into her offices in Measham High Street.
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