You should refer to HS283
for more information on the main home and CGT. The helpsheet refers to the last 36 months of ownership of a property which was been the owner's main home as being a tax free period even if they were not living there during that time. For disposals after 5 April 2014, the relief is reduced to the last 18 months of ownership.DISPOSAL IN JUNE 2015
If you sell the property in June 2015 for £400,000 you will make a gain of £200,000, £100,000 for each of you and your wife. By that time, you will have owned it for 154 months of which you will have lived in it for 123 and let it for 31. The following figures are for each of you individually:
The gain for the period the property was your main home will be exempt from CGT as will the gain for the last 18 months of ownership. That accounts for £91,558 (£100,000 / 154 x 141). The remaining gain of £8,442 (£100,000 / 154 x 13) is the gain for that part of the letting period which is not covered by the last 18 months of ownership. As the property will have been both your main home and let, you will be entitled to letting relief which will be the lesser of:
2 the exempt gain of £91,558 and
3 the letting period gain of £8,442.
Letting relief of £8,442 will reduce the remaining gain to £0 so you will have no CGT to pay based on the facts and figures provided.DISPOSAL IN JUNE 2016
If you sell the property in June 2016 for £400,000, the figures will be as follows:
Exempt gain £84,940 (£100,000 / 166 x 141)
Letting period gain £15,060
Letting relief £15,060 (the lesser of £40,000, £84,940 and £15,060).
There will be no taxable gain and, therefore, no CGT to pay.
I hope this helps but let me know if you have any further questions.