When you sell the residential property there are 3 types of reliefs available:
1. Capital gains annual exemption
The current rate of relief is £11,700 a year (2018/19).
2. Private residence relief
The amount of relief available is:
Gain × Period of occupation of property/Period of ownership.
The last 18 months of ownership always count as deemed occupation as long as the house was occupied at some point by the taxpayer.
Three further types of absence will count as deemed occupation provided the taxpayer lived in the house at some point before and at some point after the absence (you have reoccupied the property after the return). These absences are:
- • any period when employed abroad
- • up to 4 years when working away from home (this includes self-employment)
- • up to 3 years for any reason
These periods can apply cumulatively.
3. Lettings relief
Available when the property has been let as residential accommodation and the absence is not covered by the deemed occupation rules. The lettings relief is the lowest of:
- • the PPR relief
- • the gain in the let period
- • £40,000
To calculate the amount of gain your accountant will need a certificate showing:
- Purchase price of the property
- Amount of any enchantments made to the property
- Summary of any costs occurred at the purchase of the property
- Disposal price
- Summary of any costs occurred at the disposal
The gain on the disposal of the property is taxed at 18% up to basic rate band and 28% when exceeded.