I purchased a property in 2003 for £76,000. I am awaiting a valuation on it probably £120,000-£125,000). I lived in the property until 2008 as I fell ill during that time. I have had to evict my tenants this year (February 2022) and wish to return to the property. How long do I have to live in the property before it becomes free of capital gains tax (CGT) again? It will become my main home from February 2022, as I intend living in it again.
Arthur Weller replies:
It is a common misconception that if you have owned a property for some years, and now move into it as your main residence, it can afterwards be sold free of CGT. The reality is that broadly you are exempt for the years you actually lived in it and are liable for the years you didn’t live in it. In your case, let’s say you move into it now, and live there until 2028, then sell. You will have then owned it for 25 years. You will broadly have to pay CGT on 14/25 of the gain and be exempt on 11/25 of the gain (this assumes that the 'period of absence' rules (see HMRC’s Capital Gains manual at CG65040 and onwards) do not apply).