Will I pay tax when I sell my home?
If you own a property which has always been occupied as your main home, it is likely that any capital gain realised on its sale will not be taxable because it is relieved by ‘Private Residence Relief (PRR).
If you have not always lived in the property - Private Residence Relief (PRR) may be available to relieve some of the capital gain realised.
You must have occupied the property as your main home at some point during your period of ownership for Private Residence Relief (PRR) to be available at all.
There is a misconception that occupying a property, as your home, for a short period before selling it will exempt the whole capital gain. Sadly, this is not true.
Private Residence Relief (PRR) is applied to the fraction of the capital gain attributed to the time the property has been occupied as your home – plus the last 9 months of ownership (regardless of whether you were living in the property at the time).
What happens if you live in two homes?
- Only one property can qualify for PRR at any one time (except from the last 9 months of ownership) and married couples can only have one Private Residence Relief (PRR) property between them.
- Within two years of acquiring (or occupying) a second home - consider making an election to elect which property to be treated as your Private Residence Relief (PRR) for tax purposes.
- Once in place, this election can be varied. If an election is not made, you risk HMRC making the decision for you - although in practice, your PRR is often based on fact.
What happens if you can’t be physically present in your home for a period of time?
- ‘Permitted periods of absence’ include - living abroad or being required to live elsewhere by virtue of your employment which may qualify for PRR - even though you are not living in your home.
- Conditions will need to be satisfied for these ‘permitted periods of absence’ to be available
PRR is a complicated relief but, with careful planning around periods of absences, it can be managed.
- If you own properties which were once your home but haven’t been occupied for a period of time, or require advice on making (or varying) PRR elections
- Before you commit to selling a property that was once occupied as your home, speak to us to help you determine how much PRR will be available.
Capital Gains realised on the disposal of residential property are reported to HMRC, together with the Capital Gains Tax payable, within 30 days of completion.
That’s no time at all ….