From principal private residence relief to inheritance tax and capital gains tax, home owners need to keep up to speed with tax liability, explains Chris Thorpe LLB ATT CTA (Fellow) TEP
One of the most valuable capital gains tax (CGT) reliefs is principal private residence relief (PPR), potentially available on the sale of a main residence. The Office of Tax Simplification’s (OTS) report of May 2021 pointed out that between 1.5m to 2m homeowners benefit annually from the relief, which cost the Exchequer £25bn in 2019–20.
Provided that the property has been lived in for the entire time of ownership as a sole or main residence, then the entire gain on sale is completely tax-free – including the garden or grounds (anything over 0.5 hectares needs to be required for the reasonable enjoyment).
A residence is somewhere where there is a ‘degree of permanence, continuity and the expectation of continuity’ (per Goodwin v Curtis (HMIT) (1998] BTC 176), ie, it must be a genuine residence, as opposed to a temporary home or an occasional holiday home.
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