Rental Property & Second Residence Issues

Just a reminder:

As of April 2013, the replacement of stand-alone white goods in unfurnished rental properties are not an allowable expense. So don’t include them in your 2014 tax return.

However, if you replace an integrated appliance then you are still able to offset the cost against the rental income received.

Principle Private Residence (PPR) Relief

PPR is why we don’t pay tax on any gains made on the sale of our homes.

Basically, as long as the property has been your main residence and you have used the property as your home and nothing else you can sell the property without paying tax.

There are quite a few instances where you may not live in the property during the last period of ownership. For example, you may have moved in with your partner but kept the property for a while just in case! Or maybe you have bought a new house but the market isn’t quite right to sell yet and you want to hang on to it for a little while.

Historically, the final 3 years have always qualified for PPR regardless of whether you were living there or not. The chancellor reduced this period to 18 months in his Autumn 2013 statement and this comes into effect in the current (2014/15) tax year.

One To Watch In The Future

HMRC are proposing to abolish the main residence election which could have serious repercussions for those with two homes.

If you have more than one property then you may find it difficult to determine which one is your main residence. A married couple has to make a joint election but what if the husband lives and works primarily in one place and his wife lives and works primarily in another?

At the moment, you are able to write to HMRC and elect which property is your main residence. These new proposals will mean that it is ‘determined by fact’ (whatever that may mean as they haven’t yet nailed down the details).

Did You Know

If you rent out a property that you used to live in then you will receive PPR relief only for the time you lived in it (plus the final 18 months as stated above). However, you will be entitled to lettings relief which will reduce any gain you make when you sell the property.

Lettings relief is the lower of:

As always, please feel free to drop me a line if you’d like any further information.

Vikki

The Striped Leopard team have lots of experience in dealing with property accounts. Please click here to find out more.