Tax when selling your home

According to HMRC, you would normally have to pay Capital Gains Tax (CGT) on any gain you make if you dispose of:

• a dwelling house (which can include a house, flat, houseboat or fixed caravan) which is your home;
• part of a dwelling house which is your home; or
• part of the garden attached to your home.

However, you will be entitled to full relief, no tax to pay, where all the following conditions are met:

• the dwelling house has been your only or main residence throughout your period of ownership;
• you have not been absent, other than for an allowed period of absence or because you have been living in job-related accommodation, during your period of ownership;
• the garden or grounds including the buildings on them are not greater than the permitted area; and
• no part of your home has been used exclusively for business purposes during your period of ownership. Working from home using a room that is also used for non-business purposes will not prevent entitlement to full relief.

The last point is worth further consideration. If you use part of your home as a dedicated business space, an office for example, then HMRC would seek to treat any profit on the sale of this business part of your home, as taxable under the Capital Gains Tax regulations.

The point to underline here is the word “exclusivity”.

If you can argue that you use the room as an office and a personal storage space, or as an office and as a room where the children complete their homework, then this duality of use should be enough to avoid loss of private residence relief (PRR).

If you are about to sell your home and you have any doubts about the use of your home in the past, that may compromise a claim for PRR, please call so we can help you consider the facts and advise you of any tax consequences.