Letting your house and CGT

I bought my house about seven years ago and used to live in it. But I moved in with my girlfriend about five years ago, and since then, I have let my house out.  I am now considering selling it so that we can buy a bigger house together. I know normally you don’t pay any tax when you sell your house, but have I lost this exemption because I let it out?

1st April 2011

As you suggested, you are entitled to Only or Main Residence relief (OMR) on the sale of your house. In your case, the OMR will be restricted because you did not occupy it for the entire time of ownership. The last three years are counted as occupation, plus you lived in it for two years. This means your OMR will be restricted to 5/7ths of the gain.

However, you are also able to claim letting relief (assuming it was residential letting) and the amount you can claim if the lower of :

  1. £40,000
  2. The OMR relief due
  3. The amount of the chargeable gain that is attributable to the period of letting, i.e. in your case, your gain after the OMR

Depending on the values involved, this may well wipe your gain out entirely.

Capital Gains Tax is a complex area so please feel free to seek professional advice from your local TaxAssist Accountant.

By Jo Nockels

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