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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Not sure i have enough info yet but any help re CGT would be

Resolved Question:

not sure i have enough info yet but any help re CGT would be really helpful. my ex bought a property in the last 3 years, did it up and lets it out as a holiday cottage. she now wants to live in it, and then in the future sell it. how long does she have to live in it as her permanent place of residence to avoid CGT on the sale? thanks for your help
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Your ex wife would have to live in the property for a sufficient time span to enable her to claim private residence relief and letting relief that would wipe off the gain so that no CGT is payable.. I would explain this by way of an example here
Assumed total period of ownership = 84 months
including
period property let = 42 months
period as main residence = 24 months
period covered when property empty waiting to be sold = 18 months

Gain made on sale = £100k

CGT calculations

Potential gain £100,000
Period of ownership - months 84
Period as main residence - months 24
Private residence relief - months 42
Potential capital gain £100,000
Gain covered by private residence relief
(42/84) x 100,000 £50,000
Gain subject to capital gains tax (83,500-82,572) £50,000
Letting relief - maximum £40,000
This is lower of
£40,000 per owner £40,000
Private residence relief £50,000
Gain on the part of the property that's been let £50,000
Net chargeable gain after letting relief £10,000
Gain chargeable to CGT £10,000

The above gain would be covered by gains annual allowance and therefore no CGT payable.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

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Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.

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