Working out tax relief when selling your home

4 mins

Our experts at DSR Tax Refunds know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

How do you calculate your tax relief when you are selling your home?

Whether you are trying to work out whether you would be liable for Capital Gains Tax or whether you would be able to claim any tax relief, we can help you to work out where you stand when selling your home.

Firstly, let’s look at what counts as a home for HMRC’s purposes. At some point while you have owned the property, you must’ve lived in it as your only and main residence – and if you are married or in a civil partnership, you are only allowed to nominate one home per couple as your main residence. You can’t each claim a different main residence and then both claim the reliefs you might be entitled to.

HMRC won’t allow you to claim any tax relief if you have just bought the home to make a profit – however, they don’t give any specific guidance on how they would determine that.

You might also be entitled to a tax relief if the property is in the UK but you aren’t a UK resident. If your home is overseas, from 6th April 2015, you will have to have spent at least 90 days in that overseas property to qualify for tax relief for that tax year.

How do you work out if you are entitled to Private Residence Relief?

If you are entitled to full Private Residence Relief, you don’t pay any Capital Gains Tax on the gain (profit) you make when selling your nominated home. So, unless you had any other gains to report or you are not a UK resident, there would be no need to report this to HMRC.

You would be entitled to claim full Private Residence Relief if the property you are selling has been designated as your main home for the entire time you have owned it (even if you own other homes) as long as you haven’t used any part exclusively for business or let out any part of the house and as long as the grounds of the house aren’t bigger than 5,000 square metres (just over an acre) including the buildings.

If the home has only been your main residence for some of the time you have owned it, you would be entitled to some Private Residence Relief but only for the time it was nominated as your main home and the last 18 months that you own the property.

If you have used any part of your home exclusively for business use, or let out a part of your home, then you won’t get any Private Residence Relief for that part – so, if for example, you owned a 10-room home for 10 years and you used one room exclusively for business except during the last 18 months you owned the home, you would reduce the amount of Private Residence Relief you were entitled to by 1%.

If the grounds of your home (including buildings) are greater than 5,000 square metres you won’t get the full amount of Private Residence Relief – according to HMRC rules, you are only entitled to relief for an area that they consider to be required for the reasonable enjoyment of your property.

If you have lived away from your home for any reason, other than for work purposes, that can also affect the amount of Private Residence Relief you are entitled to claim when you sell your home.

How can DSR Tax Refunds help?

We know that working out whether you owe any Capital Gains Tax on the sale of your home can be a complicated affair, even with our helpful guide to tell you everything you might need to know. It’s all very well reading about it and knowing what HMRC’s stand on it is – but how do you apply that to your own circumstances? It can seem like an absolute minefield but help is always available and you don’t need to battle through this alone. Our team of experts at DSR Tax Refunds are always on hand to help our client and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

This page was last updated on 25/10/2018.

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