CGT on property

[csearle]

If one has owned a small property and allowed one's mother to live in it for 17 years during which time its value has increased from ca. £130K to ca. £320K and one is now thinking of selling it, is there a tax-efficient way of going about this regarding Captial Gains Tax?

For example would it help if I lived in it for a while?

Thanks,
Chris

[DrBunsenHoneydew]

If you use more than one home, you can nominate which will be tax-free. It doesn’t have to be the one where you live most of the time.

BUT - you have just two years from when you get a new home to make the nomination, so I don't think you can "flip" now.

[JonE]

BUT - you have just two years from when you get a new home to make the nomination, so I don't think you can "flip" now.

If mother had been living in it but no longer does so then it has only recently become available for use as a residence of the OP. It's all about using a property as a residence. The ownership of the property isn't significant - except that there'd be no point in nominating a non-owned property for CGT purposes!

The 2-year clock starts ticking whenever there is a change in the set of residences available. The quality of occupation needs to be sufficient to qualify a property as a residence so that it then becomes necessary to determine which of the available residences is to be treated as the Principal Private Residence (PPR) for the individual tax-payer (and spouse/civil partner collectively). The PPR is determined on the facts if a valid nomination can't be made.

What quality of occupation may be required for HMRC to accept that a property can be nominated as a residence is not well-defined and can depend on several circumstances but there is no set minimum period for which it must be a residence for it to be nominated a PPR. Moving into it for the first time shortly before selling a property has been tested in court and it was held that the obvious absence of intent to reside long-term in that particular case meant the property didn't qualify as a true residence so PPR relief (and Lettings Relief to which it is a passport) couldn't be claimed.

Cheers!

[Lanark]

For example would it help if I lived in it for a while?

Where a property is your main residence for only a period of its ownership, the relief is apportioned. For example, if you moved in for one year then you would only be taxed on 17/18ths of any gain. Of course you would also lose the Primary residence status on your other house.

The CGT is related to your income tax basic rate band, so (assuming you work) you could minimise this my taking a 1 year unpaid sabbatical - that would lower your tax rate on the first £46,000 of capital gain from 28% to 18% - so it would save you at most £4,600

If you emigrate you can avoid the CGT altogether, but you wouldnt be able to return to the UK for 5 years.

[Parky]

As far as I am aware you can use your personal CGT exemption to shelter £11700 of the gains in the tax year in which you sell, which would double in the case of joint ownership.