Investment Property Accountants - WARR & CO

Investment Property Accountants

Property Investor Tax Relief –

Capital Gains Tax (CGT) Lettings Relief

This important relief against Capital Gains Tax (CGT) is available to property investors who let out a domestic property that was previously their main residence.

Lettings relief operates by eliminating the gain that has arisen during the period when the property was let up to a maximum of £40,000. A simple example of how lettings relief can be used is set out below:-

John purchased a two bedroom apartment in Leeds on 1 June 1991. It cost him £40,000 and he lived in it until 31 May 2003, when he moved to a larger house in York. Rather than sell the apartment straight away, he let it from 1 June 2003 to 31 May 2008 when he finally sold it for £200,000. The total gain made by John was therefore £160,000.

The gain accruing during the 12 year period that John lived in the property is exempt as the property qualified as his principal private residency. On a time apportioned basis, this element of the profit amounts to £128,000. The gain arising while the property was let is therefore £32,000 and this is wholly exempt because it is less than £40,000.

Where a property is jointly owned, e.g. by a husband and wife, each party is entitled to a maximum of £40,000 lettings relief to set against their share of the gain.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Date of Article: 1st November 2008

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