You don’t usually need to pay Capital Gains Tax when you sell your home but there are circumstances where you may be liable to pay Tax.
Automatic Private Residence Relief
You don’t pay Capital Gains Tax when you sell your home if all of the following apply:
- You have one home and you’ve lived in it as your main home for all the time you’ve owned it
- You haven’t let part of it out – this doesn’t include having a single lodger
- You haven’t used part of it for business only
- The grounds, including all buildings, are less than 5,000 square meters (just over an acre) in total
- You didn’t buy it just to make a gain
If this applies to do you don’t need to do anything you’ll automatically get the relief when you sell your home.
If You Let Out Your Home
You’ll pay tax on your ‘chargeable gain’. This is your gain minus any Private Residence Relief you’re eligible for.
You get full relief for:
- the years you lived in the home
- the last 18 months you owned the home – even if you weren’t living there at the time.
You may also qualify for Letting Relief.
You can get the lowest of the following:
- the same amount you got in Private Residence Relief
- £40,000
- the same amount of the chargeable gain you made from letting your home
Letting Relief doesn’t cover any proportion of the chargeable gain you make while your home is empty.
Tax Tip!
Each year you will have a Capital Gains Allowance for the 2017/2018 Tax year it is £11,300. Meaning you will only pay CGT on gains made over this amount.
If You Live Away From Your Home
You may get less Private Residents Relief if you live away from your home. However, you always get relief for certain periods.
You get full relief for:
- the years you lived in the home
- the last 18 months you owned the home – even if you weren’t living there at the time.
You’ll also get relief for the first 12 months you owned the home if both the following apply:
- it was being built, renovated or you couldn’t sell your old home
- you lived in it as your only or main residence at the end of the 12 months
For example:
You own several homes with your spouse. You bought one of the houses for £120,000 in 2010.You sell the property for £170,000 in 2018 and have rented the property out for the whole 8 years. You are have made a Capital Gain of £50,000.
There are many ways to reduce your Capital Gains liability when it comes to selling your home, if you have any questions please contact LeeP on 01733 699033.