Simply explained if you sell the house you live in or have lived in, then all or part of the gain is tax exempt. Remember that regardless of occupancy, the last 36 months of ownership qualify for relief.
Special provisions apply if you own two residences and have had periods of time when you were not occupied.
As soon as a second property has been purchased, an election must be made to be the primary private residence, while the final 36-month period will be exploited with respect to the original property.
Relief will be available to both properties during the three-year period.
Each property must be a residence so that the property is not sufficient.
What is a home?
Not only bricks and mortar can be graded, but also carefully manipulated caravans and houseboats; Basically, the usual water, electricity and telephone services would have to be installed and the facts would have to support a degree of permanence and occupation as a home.
The previous use of a building / structure does not affect the position as long as in the caravans / boats the facts support the use as a permanent residence. Other types of converted buildings that would qualify would be warehouses, barns, windmills, churches, lighthouses, and many others.
There is some interesting jurisprudence on what the exemption covers when there is a dwelling with more than one building. Basically, the cases indicate that to make a decision about which buildings are exempt, you need to consider: are small buildings secondary to a larger or main building?
Are the small buildings staffed for the main house, or were they at least built for such an occupation? Can it be said that they are too far from the main house to be considered as a single unit?
Probably the most important aspect is whether, in general, small buildings can be considered part “of the entity that, in fact, constitutes the residence of the taxpayer”, and if they are within the perimeter of the main residence and are dependent on it. . home?
Garden or land?
Not only the benefits of the building are exempt, but also the land on which it is located. The maximum is 0.5 hectare; but it must be for your own occupation and enjoyment.
So can there be any exceptions?
Yes, where you can show that a larger area was required for the reasonable enjoyment of your residence considering the size and character of the home. There are several decided cases that will clarify the definition.
How long do I need to live there?
Lord Justice Widgery explained … “Some assumption of permanence, some degree of continuity, some expectation of continuity, is a vital factor that turns mere occupation into residence.”
Plot sale
The sale of your home is tax-free if it has been your only residence. The parcel that includes the site of the house is exempt if it does not exceed 0.5 hectares. This area can be exceeded under certain defined circumstances.
That said, if you sell the house with a piece of land and keep a “parcel” that is later sold; the exemption does not extend to the sale of the “parcel” as it is no longer your primary residence at the time the “parcel” is sold.
If you obtain planning permission and intend to develop yourself, I suggest that you sell the land to a company to protect the profits from the development at the corporate tax rate rather than the higher rates.
The statute prohibits relief when the home was purchased specifically for the purpose of earning a tax-free profit.
You could buy a house with up to 0.5 hectares of land or land on which you could build a house and then sell with the benefit of planning another house or houses. Do not get planning permission as this indicates your future intention.
Go only to planning at the time the property is going to be sold; You will need a reason for sale to show that you did not have development gains in mind when you originally purchased the property.
Private residence that has been rented
When a property is sold that has been your sole or primary residence, there is an exemption available to recognize the capital gain caused by any residential lease. If the property has been rented in whole or in part at any time during your ownership, taxes are charged but relief is at hand.
The statute exempts the attributable gain due to the residential lease for an additional amount. The total amount of the tax allowance is the amount exempted due to the period of residence and residence considered and an additional amount that is equal to the lesser of (a) the exemption owed, and (b) £ 40,000.
Relief applies to an individual with the result that it would appear that relief applies to you / your husband or wife / civil partner.
Private residence – Two properties
When you own two properties, it is important to carefully consider which property should be the primary residence and make a choice accordingly.
Your primary residence could well be a country property that does not have the same capital appreciation as a London flat used as a pied-a-tare. Both are used as residences, it would be wise to go for the “higher profit” to be exempt, that is, the London apartment.
This choice must be made within two years of acquiring your second home and you can modify it at any time in favor of another property.
This could be for as little as a week. It will allow you to have three years of exemption, at least, being the last three years. If it is too late to choose, you can buy a third property to facilitate a choice in time. Plan carefully and act with good professional advice.
Kids
When your children go to work or go to college, they must have their own property, even if you are called to come forward as collateral.
Buy the property in your child’s name and then they can receive the rent if they rent rooms to their friends, which should offset a high proportion of the mortgage payments. Also consider whether the relief for renting a room should be paid.
Settlement residence: exemption
When the trustees dispose of a home or part of a home that has been occupied by a beneficiary under the terms of an agreement, the provisions that exempt a private residence will apply.
I hope this has helped you not only understand the legal provisions, but also show you that everyone should earn multiple tax-free capital gains during their lifetime.
