PPR v Lettings Relief
Question:
Thank you so much for answering my questions so quickly, precisely, and in plain english. After a year of searching and a permanent headache, you have made it all seem so incredibly simple!
I just need to ask to clarify my understanding.. Regarding Lettings Relief.
Please can you confirm if the following calculations are correct in principle?
Rental property owned for 10yrs total. Rented out for 9yrs. Self occupied last year of ownership, so PPR on last 36mths only.
Purchase Price £40,000
Selling Price £100,000 After Fees etc
Capital Gain £60,000
PPR £18,000 3/10ths
Lettings Rel. £18,000
Pers Allce £10,000 rounded up
Taxable Ammt £14,000
Tax £2,520
Do I have to claim PPR?
Or can I just claim Letting relief?
ie. Could I do the following?
Capital Gain £60,000
Letting Rel. £40,000
Pers Allce £10,000 rounded up
Taxable Ammt £10,000
Tax £1,800
and is the Letting relief information still on the HMRC site anywhere please? Thank you so much.
Answer:
Glad to be of help. Yes your calclulation is correct. PPR relief would be 3/10 as outlined in the previous response. Lettings relief would then be the lower of:
In this case the given the long period of letting the gain attributable to the letting would be more than the amount of PPR relief. Therefore lettings relief would be £18,000. The annual exemption would then be deducted and CGT charged at 18% on the remaining gain.
You don't need to file a claim for PPR relief (it's given automatically) but lettings relief would need to be claimed. You therefore couldn't 'not claim' PPR relief but claim lettings relief as in your second example.
There is some basic info on lettings relief in the revenue manuals here: http://www.hmrc.gov.uk/manuals/cg4manual/CG64710.htm
About the Author
The Author of this article/answer is our site Editor, Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.
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