There could soon be a sharp rise in the number of buy-to-let looking to sell up as a consequence of the Chancellor Philip Hammond’s decision in the Autumn Budget of 2018 to abolish letting tax relief from April 2020, according to Andrew Turner, chief executive at Commercial Trust Limited.
The specialist buy-to-let broker believes that the new rules in particular, could impact on ‘accidental landlords’, those who once lived in a property and then decided to rent it out.
The sale of a former residence which has latterly been let out may be liable for capital gains tax (CGT) if the property is worth more at sale than when purchased.
Until April 2020, up to £40,000 of letting relief may apply. This relief, currently worth up to £11,200 of CGT savings, has the benefit of potentially reducing the amount CGT is charged on.
After April 2020, this lettings relief is being withdrawn, except to those who occupy the property with a tenant.
Turner said: “This is naturally a bitter pill to swallow– and could prompt those landlords affected, who had plans to sell in the next couple of years, to do so before the April 2020 deadline.
“The rules around CGT will also put a greater urgency on landlord payment of such liabilities from April 2020.
“At present, landlords who sell a rental property and make a capital gain, have until January 31st in the year after the tax year they made the sale, in which to pay their bill.
“So, for example, if an individual made a taxable capital gain from a property sale in May of 2018, they would not have to pay this tax liability until January 31st 2020.
“From April 2020, a CGT bill on the sale of a residential property, by a landlord, will have to be settled within 30 days of the completion of the disposal.”
However, with property price growth slowing down and prices even falling in some areas, Turner believes that other buy-to-let landlords may benefit from the opportunity to acquire properties already set up as rentals, from anyone looking to sell.
“For some, there may be more opportunity to buy,” he added.