By Jo White
Tax Consultant, Spofforths
It is not uncommon for individuals to let their home at some point whether as a result of relocation due to employment or due to downsizing but wanting to keep your family home.
If this is the case, you can reduce the amount of Capital Gains Tax payable on selling the property at later date. However, the timing of this can trip you up.
If you have always lived in the property, your home will be fully exempt from Capital Gains Tax, but if you have not lived in the property the whole time as your home, you may well need to pay tax on any profit made.
As many landlords are aware, Lettings Relief can reduce your tax liability, up to £40,000 per property owner, which is substantial. Lettings Relief can also be claimed if the property was previously an investment property and then became your home. Contrary to popular belief, you don’t have to have lived in the property before you let it to claim both lettings relief and principle private residence relief (PPR), which is good news.
Whichever way you approach this, you will need to be able to produce evidence of when you lived in the property as your home. Only then can you claim PPR and ultimately, then, Lettings Relief so it’s worth getting some advice as to what documentation you may need to keep.
This is particularly the case as HM Revenue & Customs becomes wise to people very carefully planning their ‘home’ moves in order to try and benefit from relief when they’re not entitled to it! HM Revenue & Customs requires evidence that you have genuinely lived in a property as your home for a considerable period before putting it on the marketing and selling it. If they don’t believe you, you won’t be entitled to the tax relief.
Each property owner is considered separately by HM Revenue & Customs, so there is even more to be aware of if your property is owned by more than just yourself. Shared ownership could bring even further relief so, in this clearly complex situation, taking a moment and some professional advice could be lucrative for you.
Spofforths Tax Consultancy Team
Tel: 01403 253 282