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When you decide to sell your home, you can avoid paying capital gains tax (CGT) on the profit you generate from the sale. You can qualify for Private Residence Relief, but there are certain occasions when you have to pay CGT.

In this guide, we’ll discuss Private Residence Relief in detail. You will learn more about the instances when you can get an exemption from CGT. If you’re looking for CGT advisors or property tax advisors near you in London, check out IBISS & CO.

Private Residence Relief

This is a tax relief you will get when you sell your home. You won’t have to pay the Capital Gains Tax if the following situations are true for you:

  • Your home is your main residence and the only one you have been living in for the entire duration you have owned.
  • You didn’t let any part of your home.
  • You haven’t used your home or any room/office exclusively for business purposes (having a temporary or occasional home office doesn’t count here).
  • Your home’s grounds, including the buildings, are less than 500 square metres.
  • You didn’t buy your home just for profit.

You’ll automatically qualify for the Private Residence tax relief if these instances apply. You won’t have to pay any tax. However, if any of the above situations apply, you must pay some tax on your capital gains.

Note: Civil partners or married couples can only choose one of their properties, at a time, as their main home.

Working From Home

If you’ve been working from home and using one part of your home exclusively for business, some of your capital gains would be subject to tax. It will be based on the percentage of your house that was being used exclusively for business. If you had a home office, spare bedroom, or study that you would occasionally use for work, you wouldn’t have to pay CGT.

tax relief claim

Extended Absences

If you’ve been gone from your home for an extended period, it can cause complications. Any extended absences would mean that your capital gains from the house’s sale would become taxable. Exceptions, in this case, would be the following.

  • If you buy a new home and cannot acquire it because you cannot sell your previous home, HMRC can give you a period of 12 to 24 months. You can declare this period as your main or only residence in the house during that period. This also applies to refurbishment or buying new land to build a house.
  • If you have been absent because you live somewhere else because of your job, you won’t have to pay CGT and can qualify for private residence relief.

If you need any help regarding a tax-free sale of your home, you can connect with our CGT advisors at IBISS & CO. We have expert tax accountants and property tax specialists offering property tax advice to clients in London and Walsall.  

Reach out to us today.

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