Capital gains tax on your principal private residence

When you sell your home (principal private residence) then there is no tax on the sale proceeds, but life in not always that simple. What happens if it has not always been your home?

The tax man will seek to tax a proportion of the gain you make based on the period it did not qualify as your home.

Capital Gains Tax on your Principal Private Residence

The gain is “proceeds less costs incurred in acquiring what you are selling” i.e. land, house, fees, building works, improvements etc.

The periods it may qualify are as follows:

  • When you lived there as your family home.
  • The last 18 month you owned the property (reduced from 3 years for contracts exchanged after 5th April 2014).
  • The first up to 12 months while you were making it habitable, this maybe extended up to 2 years for unforeseen events.
  • Any interim time you were employed full time abroad.
  • Up to 4 years between times while you were employed elsewhere in the UK.
  • Up to 3 years between times while you were away e.g. holidays, prison, hospital, visiting friends, etc.

If you have more than one home, then you can make special elections to tell the taxman which one is your main residence for any period; but they have to be made within 2 years of changes.

If you rented out your home at some time then there may be extra reliefs available to you, which could reduce the taxable profits by as much as £80,000.

Traps:

  • It needs to be home for the whole family unit i.e. a married couple must have the same principal private residence.
  • If you do not make your own election then the taxman will decide for you.
  • You can not claim for the cost of parts or even a house that has been demolished.
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