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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5141
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I own a domestic property which has an Annexe attached to

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Hi I own a domestic property which has an Annexe attached to it which we have let as a holiday apartment, we currently live in the main house and have no other accommodation.
I am considering also letting the main house as a holiday let so the two properties will operate independently of each other.
My question is, if after a few months or even years we decide to sell the property on the normal domestic market, and despite having a mortgage on the property we sold it with lets say a £100,000 equity, would there be any additional tax due on that equity.
( We have already lived in the property for 9 years so a lot of that equality has accumulated over that time )
If we did have to pay some amount of tax, could I legally offset any payment by living back into the property for a short while prior to the sale going through ?
Thank you.
Hello and welcome to the site. Thank you for your question.

First of all let me clarify this for you - CGT is levied on chargeable gain and not on what equity is left after paying off debts linked to the property. CGT would be based on the gain made from sale of property and there would be no additional tax due on increase in equity.

Any period spent in the property as your main residence would be covered by private residence relief. As it has been your main residence at some point, you would also get relief for final 18 months of ownership. Finally, there would be letting relief to be considered. This is available on residential properties that are let during period of ownership but were also main residence at some point over the period of ownership.
This is covered in HS283 here.

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.

Customer: replied 2 years ago.
Thank you for that, could you explain what a chargeable gain is, also if we lived in the property again for at least 18 months would that totally cancel out any CGT as long as we had submitted our annual returns in as any small business would. Thanks.
Thank you for your reply.
A chargeable gain is the increase in an asset's value between the time it is purchased and the time it is sold, which becomes subject to capital gains tax.
- Gain from sale £100,000
- Less: Reliefs as mentioned in previous posting
(private residence relief and letting relief)
- Balance is chargeable gain
- You offset gains annual exempt amount against it
- Leaves you with gain chargeable to CGT.
You may not totally cancel out any CGT if you lived in the property for atleast 18 months after let period. All depends on the total gain and period covered under PRR compared to total period of ownership.
I hope this is helpful and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
OK, Many thanks.