Private Residence Relief
Principal private residence relief
When you sell your home it is normally exempt from Capital Gains Tax (CGT). It’s known as Principal Private Residence relief
Each unmarried person, and each legally married couple, are entitled to the relief on their only or main residence
For this to apply, the property must genuinely be your private residence
Take great care. You’re just a quick Google away from plenty of schemes and scams which could land you in very hot water. Seems there’s a whole range of advisors for whom ‘too far’ is part of the brand
Top-tip: leave well alone and, remember, the tax authority has Google too!
It’s not set in tablets of stone as to how long you must live in the property to establish it as your private residence. It is the ‘quality of occupation’ that matters, not the time
There are some widely accepted principles. You should:
- Move into the property for a substantial period
- Notify the Local Authority (council tax and electoral roll), banks, utilities, employer(s), HMRC, etc
- Furnish the property in a way that makes it obvious you live there
- Register at the correct local medical centre
- What really matters is that the property genuinely becomes your permanent home, not temporary, and with no obvious plans of moving on
- There is no definition of ‘substantial period’. Experience suggests that means a minimum of one year and, ideally, two or more
There have been exceptions and shorter periods have sufficed but erring on the side of caution will likely stand you in good stead..
It may be possible to simply elect for the property to be treated as your main residence but it must be genuine and it’s good practice to apply as many of the above principles as possible
Remember; you may be called upon to prove it – so keep records
Inherited property
If you’ve suffered loss of a loved one there’s no easy way beyond this point, but it’s not all doom and gloom, and here’s why:
Generally, the cost of inherited property is based on the value of the property at the time of the previous owner’s death
Broadly, the tax treatment is as though the property was purchased on that date
If a property is sold by the deceased’s estate, the tax treatment is as though it was acquired at full market value on the date of the deceased’s demise
Transfers of property from the deceased’s estate are exempt from Capital Gains Tax
