We bought a one bedroom flat in London in 2000 for £240,000 and lived there until 2003. It has been rented out since 2003 and all proper records and tax returns have been filed ever since. In 2008, we raised the mortgage to £550,000 on the London property and bought a second property in Bristol for £585,000, with a £450,000 mortgage. Again we lived in it - this time for 2 years and then moved out and it has been rented out ever since - again with all the proper records and returns filed.   We would now like to sell the property in London and could achieve £1,000,000.  The London property is solely in my wife’s name and was bought before we were married in 2003. How can we mitigate capital gains tax (CGT)? My wife would like to buy a rental investment property in France, which we have regularly stayed at, which currently has a value of 200,000 Euros.  Can you advise on the CGT and how to mitigate this? Can buying another property help? What are we currently liable to pay?

As the situation stands at present, your initial gain is £760,000 (i.e. £1 million - £240,000). Assuming you have owned it for 14 years, your gain is approximately £54,000 per year. The first 3 years are exempt, due to actual occupation, and the last 18 months are exempt due to the final period exemption. This will exempt £243,000 (4.5 x £54,000) of the gain. A further £40,000 is exempt due to the letting exemption, and a further £11,000 due to the annual CGT exemption, leaving a chargeable capital gain of £466,000 (i.e. £760,000 - £243,000 - £40,000 - £11,000). If you are prepared to go back and live in the flat again for a sufficient amount of time and make it your principal private residence, before selling it, then there is a possibility that more of the capital gain could be exempt due to the 'period of absence' rules. But make certain before you actually move back in. In this country there is no rollover/holdover relief for the capital gain in your circumstances - so buying a property in France or elsewhere will not be the answer.