As people become increasingly mobile and time spent in one place reduces the rules for whether you get tax relief for any capital gains on your home become more important. You get full relief for your principal private residence (PPR) however if you have more than one home or use it for business purposes you may not get the full relief.
If you live in one home from the time you buy it to the time it is sold this will be your principal private residence. However circumstances do change and if they do so what are the rules?
If you do have to move away, or cannot move in straightaway
- Providing you only own one home you will still get full relief if:
- You worked overseas
- You worked in the UK but too far to live at home – for a period up to 4 years
- You get pro-rata relief for all of the time the house is your PPR
- Providing you have lived in the house “at some time” you always get the last 18 months of ownership (there is no restriction on this), due to “alleged abuse” this was reduced from 36 months from 2014/15
- There is also letting relief which is the lower of:
- £40,000
- the amount of Private Residence Relief due
- the amount of gain you’ve made on the let part of the property
- To avoid no relief being given where you cannot sell a previous home, you still get relief if you move in within 12 months.
There are some exceptions to full relief however:
- The area of your home and garden are large
- You have used part of your home for business purposes only
- Any letting not covered by letting relief
- You bought it as an investment to make a quick profit
As the sale of a property may well mean that your total income is within the higher rate tax band you may also wish to refer to an ealier blog on the capital gains tax rules: https://awaccs.co.uk/tax-advice/capital-gains-tax-new-rules-2010. The link on HMRC website is as follows: http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm
The advice above is generic and may not apply to your circumstances, so seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”