Marketing No Comments

Landlords letting out their former home face another tax hit from today’s (October 29) Budget.

Philip Hammond announced during today’s speech he would reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant.

This reform will apply from April 2020 and the final period exemption will also be reduced from 18 months to nine months.

There will be no changes to the 36 months final period exemption available to disabled people or those in a care home.

Lettings relief can reduce the capital gains tax on the sale of a property which was at some point used as the taxpayer’s residence but which has since been let out as residential accommodation.

This is the latest in a number of tax hits which landlords have had to face from recent Budgets.

In April 2016 the government added a 3 percentage point stamp duty surcharge for private landlords and a year later removed tax relief on mortgage interest for higher rate tax payers.

In response to the chancellor’s announcement to make changes to the lettings relief, Lilla Dilliway, director at mortgage brokers BlueWing Financials, said in her experience, most people who share their home with a tenant does not officially admit it, so the rental income is unlikely to make it onto their tax return.

She said: “As a result, I am not sure that people are even aware of this lettings relief, let alone make use of it. Those who claim it will not be happy about any reduction, but overall, I would assume that the changes will only impact a relative minority.

“As a side comment, lenders don’t normally allow tenants in someone’s main residence, but would normally give consent to a lodger.

“The reason being that a tenant has different legal rights from a lodger, so if the landlord had to repossess the property, they would have a hard time kicking out a tenant.”

Source: FT Adviser

Leave a Reply

Your email address will not be published. Required fields are marked *