From April 2020, final period principal private residence relief (PPR) will be cut again, with letting relief also severely curtailed. This comes after last April’s increase to the proportion of finance costs restricted to the basic rate, and the recent implementation of the Tenant Fees Act.
Principal private residence relief
If you have at some point lived in your rental property as your main residence, then a proportion of the gain arising on sale is exempt and will be based on the period you occupied the property. In addition to actual periods spent living on the premises, the final months of ownership are also exempt.
The exemption used to be the final 36 months of ownership but has now been cut to 18 months. From April 2020, there will be a further reduction to nine months. However, the final period exemption will remain 36 months for disabled people and those in long-term care homes.
Letting relief provides an additional exemption where you have at some point let out a property which has been your main residence. The exemption is a maximum of 40,000 of the gain, but cannot be more than the amount of PPR exemption. The relief can be up to £80,000 for a jointly owned property. From April 2020, the letting exemption will only apply where the owner of the house shares occupancy with the tenant, so there will no longer be any exemption where a whole house is let.
PPR exemption used to be the final 36 months, but it is now 18 months and from April 2020 will be only 9 months.
There is a 75% limit of finance costs at the 20% basic rate for 2019/20, up from 50% last year.
Since 1 June, it is no longer permissible to charge tenants letting fees. Letting agents are almost certainly going to charge landlords higher set up fees and increase their management fees. Deposits are now capped at five weeks’ rent for properties rented at an annual rent less than £50,000. The rules only apply in England; letting fees have already been banned in Scotland.