30 SECOND SPEED READ – CAPITAL GAINS TAX: PPR AND LETTINGS RELIEF
For residential property disposals made after 6th April 2020, Principal Private Residence Relief (PPR) will be reduced and Lettings Relief effectively abolished.
PPR applies to the sale of a main residence. Where the seller no longer occupies the property when it is sold, the relief only applies to the proportion of the gain which corresponds to the time when the seller occupied the property as a main residence.
Currently, the last 18 months of ownership are automatically franked as qualifying for PPR regardless of how the property is actually used. This franked period therefore enhances the fraction/percentage of the gain which benefits from PPR. This period will be cut to nine months from 6th April 2020.
In addition to PPR, letting relief currently applies where part of the gain remains chargeable due to residential letting during a period of absence. For disposals after 6 April 2020, letting relief will only be available if there is a degree of shared occupancy (ie the owner and the tenant both live in the residence); only the period during which both the home-owner and the tenant occupy the residence will qualify for letting relief.
Property lawyers should ensure that their clients are aware of these changes and may suggest accelerating planned residential property disposals to take advantage of the current rules.