Can I reduce CGT by moving back into my rental property before selling?
14 November 2024
Question by Chantelle
Hi,
I am in need of some advice re: Capital Gains Tax. I inherited a freehold flat in Sept 2012. I renovated and lived in it until 2015 when I left the UK to get married and settle in the USA. Since then I have been renting the flat out. I am a UK citizen but non-resident and complete a self-assessment each year for the rental income. If I return to the flat and live in it prior to selling, would I reduce the amount of CGT when I come to sell the property? If so, how long would I need to live in it for?
Thanks,
Chantelle
Answered by Matthew Spence
Hello,
This type of question would be best addressed by a chartered accountant or similar who can provide specific, tailored tax advice. While most financial advisers can offer general guidance, they typically won’t provide direct advice or recommendations for tax related situations like this unless they have a background in chartered accounting or work within an accounting practice.
That being said, Private Residence Relief (PRR) is available in the UK, which should reduce Capital Gains Tax (CGT) on the sale of your flat. Since you lived in the property from 2012 to 2015 as your main residence, you would likely qualify for partial PRR for that period. If you return to the flat as your main residence before selling, any additional time spent living there would further increase your PPR relief.
However, moving back 'just' before selling is unlikely to significantly reduce your CGT liability. This is because the relief is based on the proportion of time the property was your main residence during the total period of ownership. Additionally, my understanding is HMRC automatically exempts the final 9 months of ownership, regardless of whether one lives in the property during that time.
HMRC provides guidance on this relief, offering a reasonably comprehensive overview. You can access the latest version, updated on 6th April 2024, through this link.
Before you makes any decisions, I would recommend you speak with an accountant though. I hope this helps!
Answered by
Matthew Spence
Director
I am an experienced financial adviser committed to helping individuals and families achieve their financial goals. With over 19 years of experience in the financial industry, I have had the privilege of assisting numerous clients in making informed decisions and securing their financial future.
