Thinking of selling your home? – It can be taxing

24th July 2018 General, Tax Nicola Roby

Selling your home sounds straightforward enough but there can be tax implications which you should be aware of. Nicola Roby from CHW Accountants in Bolton provides a simple guide.

Principal Private Residence Relief (PPR)

You don’t pay Capital Gains Tax (CGT) when selling your home if all of the following apply:

• you have only one home and you’ve lived in it as your main home for all the time you’ve owned it
• you haven’t let part of it out (this doesn’t include having a single lodger)
• you haven’t used any part of it for business only
• the grounds, including all buildings, are less than 5,000 square metres in total
• you didn’t buy it just to make a profit

You don’t need to do anything. You’ll automatically get PPR tax relief and no CGT will be due.

If you don’t meet all the above criteria you may need to pay CGT.

Calculate your gain

If you don’t qualify for PPR you may need to pay tax when you sell your home.

If you do have tax to pay you will need to calculate how much gain you have made when you sold your home.

Simply, your gain is usually the difference between what you paid for your home and what you sold it for.

What did you ‘pay’ for the home?

It sounds straightforward but in certain circumstances you must use the market value instead. These circumstances are:

• the home was a gift – although there are different rules if it was to your spouse, civil partner or charity
• you sold it for less than it was worth to help the buyer
• you inherited the home and you don’t know the Inheritance Tax Value
• you owned the home before April 1982

 Certain costs can be deducted

Costs of buying, selling or improving your property can be deducted from your gain. These costs include:

• estate agents’ fees and solicitors’ fees
• money spent on improvement works such as an extension

Once you have calculated your gain and the reliefs you are entitled to you will need to work out if you need to report and pay CGT. This can be complicated and you may wish to get professional advice.

 If you live away from home

You may get less PPR if you live away from your home. However, you always get relief for certain periods, although if you are not UK resident for tax the rules are different.

If you have more than one home

No matter how many homes you own or where you lived, you always get relief for the last 18 months before you sold your home. But, it must have been your only or main residence at some point whilst you owned it.

You could nominate another home                            

If you nominate a property as your main home you qualify for relief for most of the time you lived in it. You must have lived in the home as your only or main residence at some point while you owned it. The rules differ if you are not UK resident for tax purposes. Even if you are UK resident the rules can be complicated!

You can nominate one property as your main property by writing to HMRC telling them the address of the 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 every time your combination of homes changes.

If you don’t nominate a home and you sell one of your properties, then you’ll need to calculate how long you lived in that property as your main home.

Sounds complicated? Yes, it can be. Get in touch with our experienced team at CHW accountants in Bolton  on 01204 534031 or via our contact us page.

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