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Tax-free home sales

25 April 2024

In general, there is no Capital Gains Tax (CGT) liability created when a property used as the main family residence is sold.

When you sell your main family residence, generally, you don’t create a Capital Gains Tax (CGT) liability. However, an investment property that has never served as a home doesn’t qualify. People often refer to this CGT relief as private residence relief.

You can claim full relief from Capital Gains Tax if you meet all of the following conditions:

  1. You have used the family home as your only or main residence throughout your ownership period.
  2. You haven’t sublet any part of the house – having a lodger share your house doesn’t count.
  3. You haven’t used any part of the family home exclusively for business purposes – using a room as a temporary or occasional office doesn’t count as exclusive business use.
  4. The total area of your garden or grounds, including the buildings on them, doesn’t exceed 5,000 square metres (just over an acre).
  5. You didn’t purchase the property solely to make a gain.

If you have occupied a property as a private residence at any time, you can disregard the last nine months of ownership for Capital Gains Tax purposes – even if you weren’t living in the property when you sold it. Under certain limited circumstances, you can extend this period to thirty-six months. Special rules apply to homeowners who work or live away from home.

Remember, married couples and civil partners can only designate one property as their main home at any given time.

Source: HM Revenue & Customs Mon, 22 Apr 2024 00:00:00 +0100

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