Private residence relief signpost

Private residence relief – signpost

Private residence relief: Introduction

‘An Englishman’s home is his castle’ so the idiom goes. For many people, this will have some truth, as their main or private residence will be their most valuable asset. This is particularly the case for properties which have been held for several decades and have experienced substantial growth due to the increases in the property market over this time.

Fortunately, where a property has been used as a person’s main / principal private residence at some point during its ownership then there is a capital gains tax relief exempting:

  • Periods of occupation; and
  • Deemed periods of occupation

Simply, if a property has always been occupied as one’s main residence then there will be no CGT on disposal.

However, there are more complex scenarios and you will find links to these below.

For IHT purposes, the Conservative party decided that it would be unfair for people in this position to have to sell a valuable family property to fund the Inheritance Tax (“IHT”) so introduced the Main Residence Nil Rate Band (see below).

If you are considering purchasing a property then you will need to consider Stamp Duty Land Tax (“SDLT”) on the purchase consideration.

This ‘signpost’ provides useful links to these further detailed articles on some of these issues.

Private Residence Relief Elections

Where a person has more than one property that he or she occupies as the main residence then it is possible to make an election to choose which should be treated as qualifying to the relief.

A full guide to this topic can be found here.

Private Residence Relief Quality of occupation

If one has not made an election then the issue will be decided on the facts. Where there is a question mark over this, it may be necessary to prove that you have actually occupied the property as your main residence. 

A full guide to this topic can be found here.

Private Residence Relief Deemed Occupation

As stated above, quite logically, one gets credit for the purposes of private residence relief for periods of actual occupation.

However, perhaps surprisingly, one may also qualify for relief for periods where one does not occupy the property at all.

A detailed discussion of these circumstances can be found here.

Private Residence Relief and Couples

Generally, for tax purposes, husbands and wives and civil partners are treated as separate units for tax purposes. However, generally, couples such as these can only hold one main residence for the purposes of private residence relief between them.

Further details on this topic can be found here.

Private Residence Relief Restrictions

There are other scenarios where private residence relief may be instructed including:

  • Where part of a property is used exclusively for business purposes;
  • Complications where a person is non-UK resident
  • Where the property is subject to a holdover relief claim

Further details on this topic can be found here.

Private Residence Relief Grounds and Gardens

This article will look at the ‘permitted area’ including gardens and grounds that will generally attract private residence relief when sold with the property. It also looks at some other situations such as selling off part of the garden, adding to the garden and building on part of the garden.

This can be found here.

Inheritance Tax – Main residence nil rate band

 Clearly, where a home has been held in (in particular) the South East of England then taxpayers may easily have become ‘accidental millionaires’ with little other assets to their name.

The Conservative party decided that it would be unfair for people in this position to have to sell this family property (with inherent sentimental value) to fund the Inheritance Tax (“IHT”) so introduced the Main Residence Nil Rate Band.

For further details on this IHT relief then please visit here.

Stamp Duty Land Tax (“SDLT”)

SDLT is a tax paid by the Purchaser on the acquisition of land. A rate of tax (depending on the value) is applied to the consideration paid for the property.

In the context of a private residence, the rules, rates and allowances can be different depending on who is purchasing the property and whether they own any other property at the date of completion.

There are also special rules for first time buyers of private residences.

Further detail can be found here.

 

If you have any queries in relation to private residence relief or on any other property tax matters then please do not hesitate to get in touch.

 

 

 

Private residence relief signpost was last updated on 16 September 2018

By | 2018-09-18T09:33:20+00:00 18 September 2018|Andy Wood|

About the Author:

Founder & Technical Director, Andy is a practical, creative tax adviser with a very broad tax knowledge. He is regularly quoted in the media as an expert on topical tax issues.

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