You don't usually have to pay Capital Gains Tax when you sell or dispose of your own home. This is because you get a relief called Private Residence Relief. You may have to pay Capital Gains Tax if you own more than one home or you use your home for business purposes.
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When you sell or dispose of your own home you won't have to pay any Capital Gains Tax if you satisfy two conditions. For the whole time you've owned it both the following must apply:
You may qualify for this relief if you sell part of the garden without selling your home at the same time.
To work out the relief, you need to work out the period that you've owned your home for. This starts on the later of:
It ends on the date that you sell or dispose of it.
The final three years (36 months) always qualify for relief. This applies even if you weren't living there during the final three years. It must have been your only or main home at some point during the time that you've owned it.
You might not get the full amount of relief if:
You don't have to claim Private Residence Relief - it's given automatically. You may have to show the amount of relief due on your Self Assessment tax return if you normally complete one.
If you qualify for Private Residence Relief but you make a loss on the sale or disposal of your home, it's not an allowable loss. You won't be able to set that loss off against other gains.
If only part of your home qualified for Private Residence Relief then you may be able to claim for any loss on the part that didn't qualify.
Even if you didn't live in your home for all of the time that you owned it, you may still be entitled to the full amount of Private Residence Relief.
You may still be able to get the full relief if you can't move into your home immediately when you first buy it. For example if you can't sell your old home or you need to refurbish your new home. If you move in within 12 months you'll still get the full relief. This may be extended to two years in exceptional circumstances.
You may still get the full relief even if you didn't live in your home all of the time that you owned it. The final 36 months (three years) that you own it will be treated as if you lived there, even if you didn't. The property must have been your only or main home at some time during the time that you owned it.
You'll still get the full relief if you couldn't live in your home because you were employed and either:
The following must also apply:
If you can't return to live in the house because your job still requires you to work away, you'll get the full amount of relief.
See the section 'Living away from home' below if you were absent for other reasons.
You bought a house in 1996 and used it as your main home.
Your employer sent you to work abroad in 1997.
You returned to your main home in 2002 and lived in it until you sold it in 2013.
You're entitled to full Private Residence Relief as your absence was because you had to work abroad.
You'll still get the full amount of relief if you were absent from your home, but not working away, if all of the following apply:
You might work at home, running your business from there. You can still get the full amount of the relief as long as you keep using all of your house as a home. For example, the room you use as an office may also be used as a guest bedroom.
If any part of your home is used exclusively for business purposes, you'll have to work out if there's any Capital Gains Tax to pay. For example, if part of your home is used as a joiner's workshop.
You use 25 per cent of your home as business premises and 75 per cent as your living area.
You sell your home making a gain of £100,000.
You'd be entitled to Private Residence Relief of £75,000 on the part used as your home (75 per cent of £100,000).
You'd have to work out the Capital Gains Tax due on the remaining gain of £25,000 (£100,000 less £75,000).
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it. But you may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
You used 60 per cent of your house as your home and let out the other 40 per cent.
You sell the property, making a gain of £60,000.
You're entitled to Private Residence Relief of £36,000 on the part used as your home (60 per cent of the £60,000 gain).
The remaining gain on the part of your home that's been let is £24,000.
The maximum Letting Relief due is £24,000 as this is the lower of:
There's no Capital Gains Tax to pay - the gain of £60,000 is covered by the £36,000 Private Residence Relief and the £24,000 Letting Relief.
If you live in - not just own - more than one property you can 'nominate' one as your main home. Write to HM Revenue & Customs (HMRC) to tell them which one you nominate as your main home. You must sign your nomination. See the link below to contact HMRC.
You must make your nomination within two years of the date from which you change the number of properties you live in. You should make a new nomination whenever the number of homes you live in changes.
For example, you buy a second home in May 2012. You can nominate either this or your usual home as your main home, but you must do so by May 2014.
HMRC will decide which property to treat as your main home based on the facts, unless you tell them which you nominate. This may affect the amount of Capital Gains Tax you have to pay.
If you're married or in a civil partnership and own two or more homes between you, any nomination must be made jointly. It must be signed by both of you. You're only entitled to Private Residence Relief on one home between you.
If you buy a house for a relative to live in and don't live in it yourself, you won't usually get Private Residence Relief when you sell or dispose of it.
But, if you bought the property before 5 April 1988, you may get Private Residence Relief if it was purchased for:
There are other criteria you need to meet. You can find more information by following the link below.
The relief does not apply for a father or father-in-law and was withdrawn for purchases after 5 April 1988.