Living in a buy to let property to reduce capital gains tax
Anyone owning a buy to let property will be looking to reduce capital gains tax on a future disposal.
One of the most popular ways to do this is to occupy it as a main residence before disposal.
This article looks at what you need to do to establish a property as a main residence:
How to establish a property as a main residence in 2008
What benefits do you get?
If you do establish a property as a main residence you can then claim principal private residence ('PPR') relief. This will reduce any gain based on:
Period of occupation as a main residence/Period of ownership
When counting the period of occupation the last 36 months is always included. Therefore you can qualify for partial PPR relief dependent on the period of ownership.
For instance if you owned a property for 5 years and then occupied for 1 year before selling it, you'd get PPR relief of 3/6 (50%).
In addition you'd also get lettings relief to further reduce the gain. This provides for a further CGT exemption for the lower of:
- Amount of PPR relief
- Gain attributable to the letting
- £40,000