Most of us know that we are not required to pay capital gains tax if we make a profit on the sale of our home and this is correct. However the relief is not always as straight forward as it seems…click here for further details on how to make this valuable relief work for you…
The relief which allows us to sell our home and not suffer tax on any gain which arises is called the Principal Private Residence Relief (‘PPR’).
If you own one home in the UK and have lived in it throughout ownership until sale you should be safe to assume that full relief is available. However, contrary to common belief, PPR does not operate as an automatic exemption from tax. It gives relief for the gain accruing during your period of occupation on a time apportioned basis.
Here are some points to watch out for:
• If you have lived in a property and then move out the last 18 months of your ownership will always count towards your period of occupation. This period was reduced from 3 years with effect from 6 April 2014.
• A married couple can only have one PPR between them. If you have more than one property you need to decide which is your PPR
• The property does genuinely need to be your home. There is no minimum length of time but it is all about the ‘quality’ of occupation i.e. about whether the property was demonstrably your home.
Indicators include size of utility bills at the property, invoices for home insurance (on a home, not buy to let basis), phone bills, DVLA records, tax returns, credit reference agency records, council tax records & electoral roll details, non-buy to let mortgage product & statements.