How long do I need to live in the property to avoid CGT?Make Text Bigger
I wanted to ask if I sell my main residence and move into my only buy-to-let property thus making it my main residence which I will live in, changing bank account, credit cards, register to vote at the address etc.
How many years will I need to live in the property before selling to avoid capital gains tax.
I inherited the property from a relative 8 years ago and have rented it out each year. The value at the time I inherited the property was £300K, 8 years ago which was under the inheritance tax threshold at the time.
The property is now worth circa £1 million.
Editor’s Notes: Please see HMRC >> https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2020
HMRC CGT calculator >> https://www.gov.uk/tax-sell-property/work-out-your-gain
Period of ownership
Your period of ownership begins on the date you first acquired the dwelling house, or on 31 March 1982 if that is later. It ends when you dispose of it. The final 18 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.
If you’re a disabled person or a resident in a care home, the final 36 months of ownership may qualify for relief if you do not have any other relevant right in relation to a private residence. More detail is available in the Capital Gains Tax Manual, see CG64986.
If the dwelling house has not always been your only or main residence, you’ll need to split the gain. When calculating the proportion of the gain eligible for relief, you multiply the gain by a fraction equal to the periods of occupation (including the final 18 or 36 months where appropriate) divided by the period of ownership (both periods starting at 31 March 1982 if the house was owned before that date). You do not introduce valuations of the property at the dates of changes of use.
4.4 Example 4
You bought your house in January 2006 and sold it in January 2020. You lived in the property as your only or main residence apart from 18 months in 2007 and 2008 when you lived in a different house. So the house qualifies for relief for 150 out of the 168 months you owned it. A proportion of any gain you make from the disposal amounting to 150÷168 will qualify for relief. If you had moved out of the house at some time after July 2018 instead of in 2007 and 2008, your relief would not be restricted as this absence would have been during the final period of 18 months. If you had bought the house before 31 March 1982, the calculation above would begin from 31 March 1982 and not from when you bought the house.
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