Most people buy and sell the property they live in without any thoughts about tax (other than, perhaps, Stamp Duty Land Tax). However, there are some circumstances in which selling the property you live in can cause tax problems. Some of the main ones are:
- Where you own more than .5 of a hectare of land . If you have a large amount of land, Capital Gains Tax (CGT) may apply to land in excess of .5 of a hectare (about one acre). Large areas of land will be exempt if they are "necessary to the enjoyment" of the property as a whole;
- Where the property has been let for a long period . The current law exempts private residences from CGT on a "time" basis, so if the property has been let for ten years and lived in for ten years, the gain is apportioned. However, the last three years are treated as exempt, so in the above example, only 7/20 of the gain would be subject to CGT. There are other circumstances in which periods of non-occupation can be exempt (for example, when working abroad);
- Where the property is used wholly or in part for business purposes . In this case, the chargeable gain is normally calculated by reference to the proportion of the property used for business and the period of time over which it is used. Where the business use is furnished holiday lettings, CGT rollover relief may be available. In some circumstances taper relief on the business proportion of the gain may also be available;
- Where there are two or more disposals . If the house and land are being sold separately, CGT may bite (hard!) on the land sale.
