What is principal private residence relief?
You do not pay capital gains tax when you sell (or "dispose of") 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 have not let part of it out – this does not include having a lodger.
You have not used a part of your home exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use).
The grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total.
You did not buy it just to make a gain.
If all these apply, you will automatically get a tax relief called private residence relief and will have no tax to pay. If any of them apply, you may have some tax to pay.
If the property is a second home but you lived in the property and it was your main home at some point, then the period of this residence is exempt from capital gains. Normally this would be a percentage of the total ownership period.
I have found this to be the single most valuable tax relief for property owners, particularly as other reliefs like indexation, tapering, and annual allowance have been eroded or abolished.
For help with capital gains on properties, please get in touch.
Cavendish Accountants - Watford
