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Lettings Relief – Restrictions

27th November, 2018

As part of his recent Budget statement, Philip Hammond announced the restriction/effective abolition of lettings relief from April 2020. The reason we perceive this to be an abolition of the relief is because from 2020 the relief will only apply in circumstances where the owner of the property is in shared occupancy with the tenant.

The reality is that people who share their property with a tenant are typically in more of a lodgings structure rather than lettings. Lodgers have very different legal rights and the income from short term, single room lodgings may not always have been fully declared meaning the relief cannot be applied.

The relief currently covers houses that were previously the primary residence of the owner and are now let. A quick assessment of our client’s portfolios suggests we have a large number of clients sitting on potential lettings relief gains of up to £80,000 (worth £22,400 in CGT relief). It may be that the reforms make it pertinent for clients to dispose of property before April 2020 so as to take full advantage of the relief.

This latest announcement is, in our opinion, another tax hit in a creeping barrage aimed at private landlords. In April 2016 the government increased the stamp duty surcharge for private landlords before removing tax relief on mortgage interest for higher rate tax payers 12 months later. The recent ‘clarification’ on rent-a-room relief, as reported by us in August, is another example of the targeting of those with more than one property or those seeking to maximise the value of their property portfolio.