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Posted Wed, 22 Jun 2022 16:36:34 GMT by Mark Robinson
I'm self-employed and work from home. I understand I could claim the business use portion of my mortgage interest as an expense. But this would then make me liable for capital gains on my house when I sell it. How does the capital gains work? I understand it's about the gain you made (selling price - purchase price) but would I only pay capital gains on the business portion? Is it best to not claim mortgage interest as an expense to avoid capital gains?
Posted Thu, 23 Jun 2022 14:40:00 GMT by HMRC Admin 26
Hi,


"TCGA92/S224 (1) states that relief shall not apply to any part of the dwelling house which is used exclusively for the purpose of a trade, business, profession or vocation. The gain on the disposal of the dwelling house is to be apportioned between the part of the dwelling house used exclusively for one of the purposes listed above and the part used as a residence. Only the proportion of the gain apportioned to the residential part will attract relief. This is illustrated by the example at CG64674.If, during the period of ownership, there has been a change in the part of the dwelling house which has been used for these purposes TCGA92/S224(2) provides that‘the relief given by Section 223 may be adjusted in a manner which is just and reasonable’.An explanation of how to carry out this adjustment is at CG64760+."



That means no Private Residence Relief due on the business portion of the house

Capital Gains Manual

Thank you.
Posted Thu, 23 Jun 2022 15:35:13 GMT by Mark Robinson
Thanks, I'm seeing from your answer that part of the house would have to be exclusively used for business for it to attract capital gains. So in my case the shared use nature of my house means I would still qualify for Private Residence Relief. "So a room which is used partly for business purposes and partly for residential purposes will qualify in full for relief." https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64663

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