As a general rule there is no CGT payable on the disposal of a property which has been used as the main family residence. Conversely, an investment property which has never been used will not qualify for relief. This relief from CGT is commonly known as private residence relief (PRR).

It is increasingly common for taxpayers to own more than one home and there are a number of issues that home owners should be aware. An individual, married couple or civil partnership can only benefit from CGT PRR on one property at a time. However, it is possible to choose which property benefits from a CGT exemption when it comes to be sold by making an election.

This must be done by nominating one property as your main home by writing to HMRC and specifying (with the full address) which home you want to nominate. All owners of the property must sign the letter. If you want to nominate a home you must do this within 2 years on every occassion your combination of homes changes. You must have also lived in the house as your main or only residence at some point in the past.

Planning notes

There are special rules for overseas property and for non-UK residents. It is important to carefully consider the timing and frequency of changing an election. We would be happy to help you consider your position and ensure the optimum tax structure for your needs.

If a property has been occupied at any time as an individual’s private residence, the last 18 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold.

One of the most often used and valuable of the capital gains tax (CGT) exemptions concerns the sale of the family home. As a general rule there is no CGT on a property which has been used as the main family residence. An investment property which has never been used will not qualify. This relief from CGT is commonly known as private residence relief.

Taxpayers are usually entitled to full relief from CGT where all the following conditions are met:

1. The family home has been the taxpayer’s only or main residence throughout the period of ownership.
2. The taxpayer has not been absent from the home other than for an allowed period of absence or because they have been living in job-related accommodation, during the period of ownership.
3. The garden or grounds including the buildings on them are not greater than the permitted area.
4. No part of the family home has been used exclusively for business purposes.

The last 18 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. This means that a qualifying property that is rented out for up to 18 months before being sold will remain eligible for full private residence relief. If the property has been let for more than 18 months the seller will be entitled to private residence relief for the time they lived in the property in addition to the last 18 months of ownership. Any further gain will be liable to CGT.

Planning note

It is also possible that the seller may qualify for a maximum £40,000 of letting relief thereby reducing or cancelling any chargeable gain.

We would be happy to help you calculate any tax due on the sale of a family home that has also been let during your period of ownership.

Entrepreneurs’ relief applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where entrepreneurs’ relief is available CGT of 10% is payable rather than the normal main rate of 20%. This can significantly reduce the amount of CGT due and there is a £10 million lifetime limit.

The lifetime limit means that individuals can qualify for the relief more than once, subject to the overriding condition that 20% CGT will be charged once the total amount of qualifying capital gains exceed £10 million.

The relief is available to individuals as well as some trustees of settlements on the disposal (usually sale) of all or part of a business or the sale of shares or securities in a trading company.

To qualify the individual should be either an officer or employee of the company and own at least 5% of the company and have at least 5% of the voting rights. There are also other qualifying conditions that must be met in order to qualify for the relief.

Entrepreneurs’ relief is an important and valuable tax relief for many business owners. There is also a sister relief called investor’s relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for entrepreneurs’ relief.

Planning note

Entrepreneurs’ relief is not available to companies or personal representatives of deceased persons or in relation to a trust where the entire trust is a discretionary settlement. The limit applies to all qualifying gains, whatever the year in which they arose.

Before embarking on any sale, it is important to check what reliefs will apply. We would be happy to help you review any planned disposals and help ensure that you pay as little tax as possible.

There are special rules concerning the payment of capital gains tax (CGT) on the sale of personal possessions also known as ‘chattels’. Personal possessions are generally defined as possessions with a predictable useful life of 50 years or less and are exempt from CGT up to a disposal value of £6,000.

Personal possessions include items like jewellery, paintings, antiques, coins and stamps. Marginal relief may be available where the proceeds of sale are between £6,000 and £15,000. The taxable gain is calculated as the lower of the actual gain or 5/3rds of the excess over £6,000. The disposal proceeds will normally be the amount of money you received when you disposed of the chattel.

There are special rules for sets of personal possessions. A set is two or more items together which are similar and complementary to each other, and worth more together than separately. Examples include matching ornaments or a set of chess pieces. Where a set is sold, the £6,000 limit applies to the set and there are special rules to sets that have been broken up and sold separately.

Planning note

Taxpayers are only required to report capital gains as and when they have a liability to pay CGT. Of course, calculations should be prepared (and held on file) to establish whether there is a liability to CGT. If the proceeds exceed £15,000 then any chargeable gain should be calculated using the normal CGT rules.

A capital gains tax (CGT) charge on the sale of UK residential property by non-UK residents was introduced in April 2015.

A UK non-resident that sells UK residential property needs to deliver a non-resident capital gains tax (NRCGT) return within 30 days of selling a relevant property. When such a sale is made a NRCGT return must be submitted to HMRC within 30 days of the conveyance of the property. The return must be made whether or not there is any NRCGT to be paid, if there is a loss on the disposal, and where the taxpayer is due to report the disposal on their own personal or corporation tax self-assessment tax return.

The NRCGT charge is applied at different rates if the seller is a non-resident individual, personal representative, trustee closely-held company or fund. Any NRCGT that is due must also be paid within 30 days of the conveyance date.

If the taxpayer is registered for UK tax they can opt to pay the NRCGT due when they submit their regular self-assessment return. There are penalties for failing to file the NRCGT return within the deadline as well as for failing to pay any tax due on time.

Planning note

Only the amount of the overall gain relating to the period after 5 April 2015 is chargeable to tax. In certain circumstances private residence relief may apply where a property is the owner’s only or main residence. Please call if you need advice regarding a proposed or recent property disposal.