I lived in my property for three years before renting it out three times. I now want to move back full-time and make it my main residence. I will have no other property once I sell the house I’m living in now. I paid £325,000 but spent £100,000 on it; the house is now worth £650,000. How much capital gains tax (CGT) will I have to pay if I do not move back in?

Arthur Weller replies: 

There is not enough information to answer your question. However, since you spent £325,000 on purchase and a further £100,000, it would appear that your capital gain is £225,000. This is dependent on the £100,000 you spent being capital expenditure, which basically means improvement expenditure (i.e., not refurbishment expenditure and like-for-like replacement). This also assumes that you didn't claim any of the £100,000 against your rental income. You divide the £225,000 by the years of ownership, to find the capital gain per year (call it £X). Three years, plus the last nine months of ownership are exempt from CGT due to principal private residence relief. So, multiply £X by 3.75 to give £Y. Deduct this £Y from £225,000 to find the capital gain on which CGT would be payable. You can also deduct your £3,000 annual exemption (if not used elsewhere) from this capital gains figure.