Understanding PRR and Letting Relief for Property Disposal

I am seeking some guidance on the tax implications related to the disposal of my property. Here’s a bit of background to help clarify my situation: - I purchased a property in 2014. - Since the purchase, the property has been rented out continuously. - I have been living abroad for the last 10 years, working self-employed online, and residing with my elderly parents. - I am uncertain if the property qualifies as my main residence due to my absence and the continuous rental status. Currently, I am considering two options: - Selling the property at the end of the tenant's tenancy this year. - Moving into the property at the end of this year, living in it for 2 years, and then selling it. I need assistance in understanding the tax implications for each scenario, specifically regarding: - Private Residence Relief (PRR): Whether I am eligible for PRR given that I have never lived in the property, and if so, how it would be calculated. - Letting Relief: Whether I qualify for Letting Relief in both scenarios, and how it would impact my CGT liability. Scenario 1: Selling the Property This Year -What are the tax implications if I sell the property after the tenant moves out? - Would I be eligible for any PRR or Letting Relief despite never having lived in the property? Scenario 2: Moving In and Then Selling After 2 Years - If I move into the property at the end of this year and live there for 2 years, how would PRR be calculated? - Would I qualify for Letting Relief, and if so, how would it impact my CGT calculation? Additional Details I believe I can claim to reduce the CGT bill: - I spent £120,000 on improvements to the property. - Original purchase costs included £13,050 SDLT, £978 legal fees, and £270 Land Registry fees. I appreciate any insights or advice on these matters. Understanding the tax implications will greatly help me decide the best course of action. Thank you for your assistance!

Hi,

As you have never lived in the property it will not qualify for Private Residence Relief and you will be liable to tax on any increase in value.

No lettings relief is due as you have not lived in it whilst being rented out.

We cannot comment on future events so cannot say what the position will be should you not sell it this year.

You can see guidance for details on what you can claim here:

CG15180 - Expenditure: enhancement expenditure

CG15250 - Expenditure: incidental costs of acquisition and disposal

Thank you.

 

@HMRC Admin 19, thank you very much for the reply. Could I ask for some clarity on the following, please? Would I be able to deduct the stamp duty levy initially paid on the purchase of the property against the capital gains tax? Thank you for your assistance!

Hi,

Private Residence Relief is available to anyone who has disposed of a property that was their main residence for a period of time. You can see guidance here:

Private Residence Relief (Self Assessment helpsheet HS283)

Letting relief is available in situations where the property was let out as a furnished holiday let. Guidance on this can be found here:

Furnished holiday lettings (Self Assessment helpsheet HS253)

Thank you.