The Capital Gains Tax (CGT) relief for gains made on the sale of your main home is a very valuable relief from which many people benefit during their lifetime.
Only a property occupied as your main residence can qualify for the relief, an investment property in which you have never lived would not qualify. The occupation of property as your main residence requires a degree of permanence and is generally determined around the quality of the occupation, rather than the quantity.
Selling land separately
Where you are thinking of selling off some of your garden, generally the relief will be available if you continue to own the property with the rest of the garden and the total original area was within the permitted area.
The permitted area is half a hectare including the site of the property. Larger gardens and grounds may qualify for relief, but only if they are reasonable for the enjoyment of the property. Where the total area exceeds half a hectare, and some land is sold then you would have to show that the part sold was needed for the reasonable enjoyment of the property and this can clearly be difficult if you were prepared to sell it off.
You will not benefit from relief on the second sale where you sell your house first and retain part of the garden which you then sell off separately at a later date. This is because the land sold later is no longer part of your main residence at the point of sale.
More than one residence
It is increasingly common for people to own more than one residence. However, an individual can only benefit from the CGT relief on one property at a time. In the case of a married couple/civil partnership, there can only be one main residence for both. Where an individual has two, or more, residences then an election can be made to choose which should be the one to benefit from the CGT relief on sale.
The election must normally be made within two years of the change in the number of residences.
Business Use
More and more people now work from home which may affect the CGT relief on sale of the main residence.
The general rule is that the relief will be denied to the extent that part of your home is used exclusively for business purposes. In many cases the business use will not be exclusive, for example your office doubling as a spare bedroom for guests, in which case there is not a problem. Where there is exclusive business use then part of the gain on sale will be chargeable to CGT.
Residential letting
Relief is given if you lived in your main residence at the same time as you had tenants living in your property with you. Letting relief cannot be claimed for periods where your property was empty or where it was let without you also occupying the property at the same time.
Periods of absence
Certain periods of absence from your main residence may qualify for CGT relief if say you have to leave your property to go and work elsewhere in the UK or abroad. The availability of the relief depends on your circumstances and length of period of absence. Please talk to us if this is relevant for you. We would be happy to set out the rules as they apply to your particular situation.
If you would like more information on the above, please contact me for an informal discussion on how we can help.