Selling a rental property? If you have previously lived in it, read on...

Are you selling a rental property that you have previously lived in?

The capital gain you make on the property could be subject to hefty capital gains tax.

At Glover Stanbury we have helped a client reduce their tax bill to only £15,000 on an overall capital gain of £500,000 over 20 years of ownership by making various claims including Lettings Relief.

We can help you use all the HMRC reliefs available to you to ensure you pay only what you owe and no more…

You will pay tax on your chargeable gain, which is the gain you made selling your property less any Private Residence Relief you are eligible for.

The Private Residence Relief is:

  • The years you have lived in the house
  • The last 18 months you owned the house – even if you weren’t living there at the time.

HMRC give an example:

You make a gain of £120,000 when you sell your home, which you owned for 12 years. You lived in the whole property for 6 years, then you let it out in full for 6 years.

You get Private Residence Relief for the time you lived there (6 years). You also get relief for the last 18 months you owned the property, even though you weren’t living in it.

This means you get Private Residence Relief for 7.5 of the years (62.5% of the time) you owned the property.

You get Private Residence Relief on the same proportion (62.5%) of your gain. This means you won’t pay tax on £75,000 of the gain.

The remaining 37.5% (£45,000) of the gain not covered by Private Residence Relief is your chargeable gain.

You may also qualify for Lettings Relief with the lowest of the following:

  • The same amount you got in Private Residence Relief
  • £40,000
  • The same amount as the chargeable gain you made from letting your home

Going back to HMRC’s example:

Because you made a chargeable gain of £45,000 while letting your property (and got £75,000 in Private Residence Relief) you can claim £40,000 in Letting Relief. This means you’ll pay Capital Gains Tax on £5,000.

There are other rules that may need to be applied, or you may have only let out part of your home. Contact us for further information.

www.gloverstanbury.co.uk mail@gloverstanbury.co.uk


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