Smart tax move

By THIS IS MONEY
Updated:

 

I OWN two homes - my main residence and one that has been let since 1991. I plan to sell my main home and move into the other. How long must I live in it before I can sell and avoid capital gains tax? CC, Truro

Mike Marburton at chartered accountant Grant Thornton in Cheltenham, Gloucestershire, replies: There is no set period that you have to live in a property before it becomes your principal private residence for capital gains tax purposes.

The key point is that you should genuinely live in it as your home with some degree of permanence. Six months will probably be sufficient to establish this.

You will then be exempt from capital gains tax for the portion of the time that you have lived in it, but this will always include the last three years of ownership.

So if you lived in it until October 2005, you would be exempt from 3/14ths of the gain. You would also be allowed to deduct up to £40,000 letting relief and you could claim taper relief, which will discount whatever is left by 25%.

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