IN THE CURRENT climate not many people are fortunate to have more than one property. For the ones that do, there are tax pitfalls to avoid if you are thinking of selling one of those properties.

With the post lockdown mini property boom those thinking of selling the house need to remember the main residence rules when selling. At Shipleys Tax we have our experts who can guide you around the tax traps and we have summarised them below.

Main residence tax relief

The “main residence” tax relief is called Private residence relief. It removes the charge to capital gains tax on the taxpayer’s only or main residence, i.e. there is no tax to pay on sale even if you sell for a large profit.

For the purposes of the relief, a taxpayer can generally only have one residence qualifying for the relief at any one time, subject to the final period exemption for properties which have been the only or main residence at some time, set at nine months from 6 April 2020 (unless the taxpayer goes into care, in which case the final 36 months count).

The “main residence” tax relief… removes the charge to capital gains tax on the taxpayer’s only or main residence, i.e. there is no tax to pay on sale even if you sell for a large profit.

Married couples and civil partners can only have one main residence between them.

More than one residence

Where a taxpayer has more than one residence, they can nominate which of them counts as the main residence for the capital gains tax purposes. However, to be nominated, the property must be lived in as a ‘residence’ – a property which is let out cannot be nominated.

The nomination must be made within two years of the date on which the particular combination of residences changes. If a nomination is not made, which property qualifies as the main residence for capital gains tax purposes will be determined in accordance with the facts.

Where a taxpayer has more than one residence, they can nominate which of them counts as the main residence for the capital gains tax purposes.

Example

Ahmad has lived in a cottage in Shropshire since December 2012. In October 2019 he starts a new job in London, buying a flat in January 2020 to live in during the week. He has until January 2022 to nominate which of his residences is his main residence for capital gains tax purposes.

Getting married

Where a couple marry or enter into a civil partnership and each partner owned a residence which the couple continue to use after the date of their marriage of civil partnership, they must nominate which residence is their joint main residence as married couples and civil partners can only have one main residence between them. The nomination must be made within two years of the date of their marriage or civil partnership.

However, unmarried couples can each have their own main residence.

If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.

Please note that we do not give free advice by email or telephone.