Another stealth tax is likely to add to the woes of landlords selling an investment property.

HM Revenue & Customs wants to slash the tax relief on selling homes.

Currently, under principle residence relief (PRR) investors benefit from an 18-month capital gains tax-free period when they sell a letting property, providing they can show they lived there as their main home at some time during the period of ownership.

From April 2020, HMRC wants to cut this relief in half to 9 months.

The effect would be to reduce tax relief investors can offset against capital gains tax bills.

HMRC argues that the exemption is open to abuse by landlords trying to avoid CGT bills when they dispose of a rented property.

HMRC has also announced scrapping lettings relief under PPR from the same date, which could cost property investors up to £40,000 of CGT tax relief.

Tax experts are also concerned the 18 to 9-month tax relief cut could mean some sellers pick up unnecessary tax bills because they may have time to complete their sales.

Aparna Nathan QC, Chair of CIOT’s CGT & Investment Income Sub-committee, said: “If HMRC have serious concerns about abuse of the PRR, they could consider conducting a broader consultation about the objectives and effectiveness of the relief.

“It is important for HMRC to provide the evidence base that has been used to evaluate whether nine months is sufficient time for those who are genuinely trying to sell to move to a new house particularly as there are likely to be large regional variations and differences depending on property values.

“There are some circumstances where 9 months will not be enough time to sell the family home. In the case of ‘no-fault’ divorce, where the property is to be sold, the time limits may prohibit a sale until more than 9 months has elapsed. Consideration should be given to whether an exception should be available.”