There are a number of changes coming into effect from April 2020.
You will only be entitled to a 20% tax relief on your mortgage interest on residential properties. This does not apply if you have commercial property.
The main changes are relevant to capital gains tax when you sell the property or gift it.
- If you had lived in the property as your main home at any time you would be entitled to claim lettings relief against the gain of the property. From April 2020, the right to claim lettings relief is being restricted and so is unlikely to apply to you. This could cost you up to an additional £11,200 in capital gains tax.
- You would also be entitled to an additional 18 months to be treated as your main home. This is to be reduced to 9 months. This could cost you additional tax on this period.
- Capital gains tax will be due to H M Revenue & Customs within 30 days of the sale of the property. A declaration must be made by the individual and an estimate will need to be made of the tax payable. The tax must then be paid within 30 days. The responsibility to calculate and pay the tax falls on the seller.
If you have any properties that are buy to lets and have been your main home, it may be worth considering incorporating to a limited company before the changes come into effect.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the contact us page on our website: www.champconsultants.co.uk
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