Proposed changes to letting relief should be transitionally phased in to prevent landlords from paying significantly higher capital gains tax bills, a tax group has said.

Until the end of 2019/20, landlords can claim letting relief of up to £40,000 if they have lived in a property at some point during their ownership.

Subject to the measure being in a new Finance Bill, the relief will only apply to those who shared occupation of their property with a tenant.

The Association of Taxation Technicians (ATT) has warned that many landlords are on a cliff edge as a result.

From 6 April 2020, landlords who let out their property after they moved out will lose any relief they would have been entitled to for those let periods.

The shared-occupation rule contained in Finance Bill 2019 will also apply to any let periods before 2020/21.

Michael Steed, co-chair of the ATT's technical steering group, said:

"Someone who was entitled to the maximum letting relief under the old rules, but sells on 6 April 2020, could be up to £11,200 worse off than if they had sold a day earlier.

"If the shared-occupation change to lettings relief goes ahead, any entitlement built up under the old rules should be frozen and preserved at 5 April 2020, with the new conditions only applying to let periods after that.

"This should help to avoid the cliff-edge effect and avoid the retroactive effect of the policy."

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