The number of property investors in the UK has increased significantly in the last decade, with many choosing to let out property to supplement their income or provide security in retirement.
However, this meteoric rise in second homeowners has led to the Government introducing several tax changes that have made letting property less profitable, which has driven some to leave the market.
Now, in a new blow, landlords and investors will face a series of changes next year that could affect the sale of their property as well.
From April 2020, the date on which Capital Gains Tax (CGT) must be paid on gains arising on the sale of residential property is changing, taxpayers will have only 30 days to file a CGT return and make an advance payment towards their tax bill where CGT is due.
This differs drastically from the current rules, which allows people to pay CGT on the disposal of a property up to 22 months after the sale as part of their self-assessment return. Most people will not pay CGT on the sale of their main home thanks to tax relief, but some larger properties and second homes do not qualify for any relief, so this will particularly affect landlords.
At the same time, Lettings Relief will be restricted to property owners who have shared occupancy of a property with their tenant at some point during their ownership.
Under the current rules, taxpayers who let a property that either is currently, or used to be, their main residence can claim Lettings Relief of up to £40,000 when they sell that home, with up to double that being available to a married or civil partnered couple.
For many who let their home out before moving overseas, during a separation or after a loss of a loved one, this could have a significant impact.
Also, from April, the Final Period Exemption (FPE) for Principal Private Residence Relief (PPR) will be shortened, meaning that landlords will only be exempt from paying CGT on the gains made in the final 9 months of ownership, instead of the final 18 months.
Those affected by these upcoming changes must seek help as soon as possible to minimise the potential impact on their future property sales.