Cwmbran accountancy firm Green & Co is warning property owners to make themselves aware of changes in the tax rules relating to the sale of residential properties in England and Wales, with effect from April 6, 2020.

The three main changes are: letting relief is being replaced with lodger’s relief; a reduction in the final exemption period; and the increased frequency that Capital Gains Tax (CGT) is reported.

At present, where a let residential property is sold, but has been the main residence at some point during ownership, as well as receiving an exemption from capital gains tax for the relevant period, a claim could be made for lettings relief for the period during which the property was let.

However, under the new rules, lettings relief disappears, unless you have lived in the property at the same time as a rent-paying lodger, where lodger’s relief may apply.

Referring to the reduction in the final exemption period, Green & Co Partner, Barrie Kenyon said: “Under the current rules, the last 18 months of ownership is always exempt from capital gains tax, provided that you have occupied the property as your main residence at some point during your period of ownership. However, this is now being halved to nine months.”

The chargeable gain on residential property must now be reported to HMRC and the tax paid within 30 days of completion. It may not always be possible to determine the rate of capital gains tax payable due to the interaction between income tax and capital gains tax rates, and the possibility of further capital gains or losses arising in the same tax year, so an estimate may be required.

Capital Gains must still be reported on the self-assessment tax return by January 31 following the end of the tax year, but any tax paid on account under the new '30-day return' will be taken into account when arriving at the final liability for that year.

In order to avoid these costly changes, Barrie suggests that exchanging contracts prior to April 6 this year is advisable.

He said: “If you are selling a property likely to be affected but are unable to sell, it may be better to engineer a deemed disposal before April 6, 2020, to crystallise the reliefs before they disappear, for example by transferring the property to a trust prior to sale. We are always happy to discuss the impact of the changes and offer advice and assistance to anyone who has concerns regarding the new rules.

"It must be stressed that none of the above affect sales where the property has been the owner’s main residence for the whole period of ownership."