Joseph, thank you for your prompt reply.
Hello! I have a house I am considering either renting out or selling. I always thought that CGT would retroactively apply on any period where this house is not my primary residence (as in a period where it was entirely rented out). But now I hear that if one moves back in to a place, in other words it becomes one's primary residence again, for a minimum 6 months, then zero CGT is chargeable. This would represent an enormous difference in potential liability as the house in question is in Chelsea and can be subject to rapid increases in value. It would be absolutely wonderful to know definitively how CGT is applied.
As the property is your main residence at present, if you decide to rent it out for a period before selling it you would be entiltled to relief as follows:
All period covered as main residence – private residence relief 100%
Final 18 months of ownership – additional relief 100%
As the property would have been your main residence at some point during period of ownership, you would also be entitled to letting relief to cover period let, to a maximum of £40,000.
More information on private residence relief is covered on HMRC worksheet HM283 here
Also, briefly, if it is the case that CGT can be effectively nullified by living in a place again for 6 months, are you aware of any planned legislation to close that 'loophole' (if indeed it can be considered a loophole)? And lastly if I mortgage a property that is being rented out, in other words I no longer really own it, how is CGT applied should I eventually come to pay off the mortgage and sell?
There is no CGT payable on sale of a property that is your main residence as all gain is covered by private residence relief. This may not be the case if the property is not your only or main residence throught out the period of ownership.
As far as mortgaged property is concerned, outstanding loan has no bearing on CGT as the tax is based on gain on realisation irrespective of debt/equity ratio of the property value.
I hope this is helpful and answers your question.
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