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One of the most often used and valuable of the Capital Gains Tax (CGT) exemptions is Private Residence Relief, which usually exempts any profit made on the sale of a family home.
Consequently, there is no CGT on a property disposal that has been used solely as the main family residence. An investment property, which has never been used as a family residence, will not qualify for PRR.
However, an interesting counter point occurs if and when you make a loss on the sale of your home. You will not be entitled to any CGT loss relief as you would have qualified for PRR if the property was sold at a profit.
Other planning points
If you would have qualified for partial relief, part of your loss will not be allowable, and that part should be calculated in the same way as you would have calculated the partial relief if you had made a gain.
The sale of a second home such as a holiday home or a property, that was bought as an investment and rented out either in the UK or overseas, may be subject to CGT. Conversely, any loss incurred on the sale of such a property is likely to be an allowable loss and can be used to reduce any taxable gains subject to CGT.
If you are contemplating the sale of a property that has had mixed use as your home and let for periods of time, please call if you need help estimating any CGT that may be payable.
Addison & Co