Changes to Private Residence Relief in April 2020

Helen Marsh, Partner in the Residential Real Estate Team at Forsters LLP, comments:

“The final 18 months of ownership of a principle residence are currently treated as a “deemed” period of occupancy irrespective of whether the property is occupied by the owners as their main residence during that period.  This provides a CGT free period where an individual has not been able to sell their home before moving to a new main residence.

This 18 month “deemed occupation” period is set to be reduced to 9 months in April 2020.   The government consider 9 months to be sufficient time for people to sell their homes “but not so long that they are able to accrue large amounts of relief on two properties simultaneously”.  Whilst this may be correct in a strong property market, in the current market a sales period of well in excess of 9 months is not at all uncommon.  People who struggle to sell their properties within 9 months of moving out face an increased CGT liability whereas their property is unlikely to have increased in value in that time.

This reduction in the relief will hit (perhaps unfairly) those people who are forced to leave their homes due to a relocation, or to physical disabilities which mean their old home is no longer suitable.

We would expect the April deadline to impact the buy to let sales market, with owners trying to push through sales in time.”

Kindly shared by Forsters LLP