Fresh requirements will increase the complexity for landlords and people making money renting out their main residence from 2019.
The Finance Bill 2018/19 draft legislation has been published ahead of November’s Budget. For those keeping an eye on property taxes, it includes the following:
- A new ‘shared occupancy test’ will be applied to rent-a-room from 6 April 2019. The relief currently exempts up to £7,500 a year of income from tax, but from next year will no longer apply if the entire property is rented out for the tenancy period. This will mean an end to letting out your home tax free during sporting events, such as Wimbledon, to fund a holiday.
- The window for filing and paying stamp duty in England will be cut to just 14 days from the date of sale from 1 March 2019. It is likely that Scotland and Wales will apply this rule to their property transaction taxes as well.
- Capital gains tax (CGT) due on taxable gains on residential property sales must be paid within 30 days of the sale, and a tax return must be made from 6 April 2020. If adjustments are required, they must be made via a self-assessment return.
Various measures have been introduced over recent years to make things more difficult for private rental landlords. New rules and requirements imposed include: a new tighter expenditure-based regime replacing the wear-and-tear allowance for furnished lettings; the phased replacement of full income tax relief on finance interest costs with a basic rate tax credit; a 3% stamp duty surcharge for second residential properties; and an 8% capital gains tax surcharge on residential property.
The effect of these changes is visible as new buy-to-let sales are dropping, and large numbers of landlords are reportedly looking to sell rental property. With the new requirements affecting property disposals, it may be worth reviewing your arrangements ahead of the above deadlines.
If you would like advice on the available allowances, or tax implications of any purchase/sale, do talk to us about your options before taking any action.