The selling or gifting of residential property will be a Capital Gains Tax (CGT) event, whereby the gain will normally be calculated by reducing the market value/selling price for the cost of acquisition and for other allowable expenditure.
The main relief from CGT available to individuals when disposing of residential property is principal residence relief. Lettings relief may also provide relief when the qualifying conditions are met.
Principal Residence Relief
Principal Residence Relief is available for properties which are or have been a main residence. The relief covers the house and the associated land. For qualifying land, there is an allowable permitted area up to 0.5 hectares but this can be more where the land is required for the reasonable enjoyment of the residence, taking into account its size and character.
There is no minimum occupation period to qualify for principal residence relief, however a number of factors will be considered by HMRC including the nature, quality, length and circumstances of the occupation.
Lettings Relief
Lettings relief potentially provides relief from CGT for periods where the property has been let out. In April 2020 the relief was revised so that it only applies where the owner continues to occupy the property during the period of letting, the result being it is now effectively a relief for lodgers.
Reporting Requirements
The disposal of residential property needs to be reported to HMRC within 60 days of completion. No report is required if there is no actual CGT liability for a UK resident. The tax due must also be paid within 60 days, which may require estimates may being made.
Senior Tax Manager Lucy Orrow has written extensively about the reporting requirements. Please find her latest update here: Using the Online Capital Gains Tax Reporting Tool
If you have any questions regarding selling or gifting of residential property or if you need any specific advice or assistance, please get in touch.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.