Question: How can we sell our property without paying capital gains tax?
I have owned and lived in our property with my wife. We are joint owners. If we rent out the property for three years, how long would we have to live back there to sell it without being liable for capital gains tax (CGT)?
Arthur Weller replies:
Answer: There is a possibility of renting out your main residence for three years, then returning to live again there as your main residence, and afterwards sell it without any CGT. This is by means of the 'periods of absence' rules, which you can see in HMRC’s Capital Gains manual at www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64970p (see CG65030 onwards). But in order to qualify for this you need to make sure: (a) when you move back to your home you live there as your main residence (e.g. perhaps for a year); and (b) during the three years you don't live in a property that could qualify as your main residence. This includes a property that you rent. The way to overcome this obstacle is to make an election that your original home is your main residence.