A leading tax specialist has warned homeowners who rent out another property that they must prepare ahead of a ‘game-changing’ Whitehall tax change.
From April, those who own more than one house may pay higher taxes when they come to sell the property as part of a Government overhaul of the ‘lettings relief’ tax arrangements.
Gary Priest, a Partner at Midlands law firm mfg Solicitors, says many homeowners who let second properties are unaware of the change which he says will significantly affect how much capital gains tax is paid when the property is sold.
He said: “With so much commentary around the country’s future in recent months it has been easy for people to have missed this looming change to property tax.
“The lettings relief was effectively a tax break but from 6 April this will be lost. The current arrangements see people receive capital gains tax relief up to £40,000. However, from April if you rent out a property that was formerly your main home, the tax relief will only go to landlords who are physically living in the property with their tenants.
“It’s a big change and it needs landlords to be financially prepared as owning extra properties may not be so attractive given the financial incentives drop.
“The only way to avoid the tax chance is to sell the property ahead of the April change – an option that I am certain many will seriously consider.”
Mr Priest, who provides tax services to individuals and businesses across the region, added that 6 April will also see a change to main residence rules. Currently the last 18 months of ownership are treated as tax exempt regardless of occupation. After April this period will be halved to nine months.
For further information on property tax matters readers can contact Gary through: firstname.lastname@example.org.