Tax relief when you sell your home … and it’s limitations

Automatic tax relief when you sell your home?

It is a commonly held point of view that when you sell your home you won’t pay any tax, and in particular, that you won’t pay any Capital Gains Tax on the difference between the purchase and sales prices. In general this is true as long as it has been your main residence during the entire period of ownership but, unfortunately, there are circumstances when obtaining tax relief when you sell your home is not automatic.

Letting the Property

For example, you may have some tax to pay if you have let all or part of your house for part of your period of ownership. In that case a calculation must be made to determine the percentage of any gain that is, and is not, taxable. You can claim some further reliefs although these are scheduled to become less advantageous from April 2020.

Selling off Land

There is also a restriction on the amount of land you can sell as part of your home/garden tax-free. Currently this is 5,000 square metres or just over one acre. And if you sell your home and retain part of the garden to sell at a later date, the subsequent sale of the land will attract a Capital Gains Tax charge.

You may also incur a tax cost when you sell your home if you have used part of the property exclusively for business purposes – this would not include non-exclusive use, such as using a spare bedroom or study as a part-time home office.

Living Abroad For a Period

Other issues that can occur if you sell your UK home while you are non-resident for UK tax, although if you move abroad, let the property and return to live in it you may still not be liable to CGT. The details are important here as elsewhere so do get expert advice in advance of any sale.

If you are unsure whether you will qualify for tax relief when you sell your home, by all means call to discuss your options or look at our website for further information.