If you’re a homeowner with more than one property, you might be pondering the implications of nominating your main residence for capital gains tax (CGT) purposes.

Understanding Private Residence Relief

Private residence relief is a blessing for many homeowners in the UK. It enables you to keep your hard-earned gains tax-free when you sell your home, provided you meet specific conditions. The gain must relate to the period you lived in the property as your main residence, or the last nine months of ownership (36 months for those who are disabled or moving into care).

But what if you have more than one home? How can you determine your main residence for capital gains tax purposes? That’s where things become interesting.

Nominating a Main Residence: What You Need to Know

If you have multiple residences, you can choose one as your main residence for CGT purposes. However, you must:

  • Consider occupancy: Only properties you live in can be considered for main residence status.
  • Notify HMRC: You must write to HMRC, providing the address and signatures of all property owners.
  • Mind the time frame: An election must be made within two years of a change in the mix of residences.
Real-life Scenario

Meet Paul and Gill, a couple from Liverpool. When Laura’s new job required her to work in London, they bought a flat there. Both properties were considered residences, and they had to elect their main residence for CGT purposes. They did this in January 2020, choosing their Liverpool house. In June 2022, they moved to Bath and made a new election for their Bath house as their main residence.

Varying the Nomination: Flipping the Residence

The nomination can be varied at any time, allowing homeowners to ‘flip’ their main residence to maximise private residence relief benefits. This includes backdating the variation up to two years.

Another Example

The same couple, Paul and Gill, planned to sell the London flat. They varied their election in July 2023, backdating it to October 2022. They made further adjustments in September 2023, backdating it to March 2023. This allowed the London flat to be the main residence for a specific period, securing the last nine months of ownership for main residence relief.

Swapping your main residence for capital gains tax purposes isn’t just a matter of paperwork; it’s a strategic financial decision. With a good understanding of the rules, local considerations, and careful timing, you can make the most of your property investments. Remember, your home is not just where your heart is; it’s where your tax relief can be too!

 
 
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Any questions?

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