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samtheman

Private Residence Relief / Letting Relief

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I purchased a property as an FTB a little over a year ago, which for a long list of family circumstances, I eventually had to rent out (there's a BTL mortgage on the flat)

This is the only property I own and I currently rent the flat where I now live.

Because of these same circumstances, my partner and I are considering selling the flat in the next few years when we leave the country. I'm aware of the 18-month rule regarding private residence relief.

We're considering moving into the flat that I own (while switching the mortgage to residential) for a certain period, and we have no set date for us leaving the country just yet.

However, bearing in mind that we would be moving into the flat approx. 2 years after having purchased it, is there a minimum time we would need to live there before we can apply Private residence relief or Letting relief when it comes to selling?

If, hypothetically when selling, the price had increased by 80k and we had lived there for, say only 6 months over a 5 year period with the last 18 months of renting out, would we still benefit from Private residence relief/Letting relief?

It sounds fairly surprising that a short period of living in the flat would introduce large tax relief, but in any case, this would be a genuine home for us (i.e. no actual "flipping" of main residence as this is the only property I own)

i.e.

Private residence relief for the last 18 months + 6 months of living there so (2/5) * 80k -> 32k

Letting relief for the period it was rented out -> 32k (since I wouldn't be able to receive more letting relief than private residence relief)

So I would be liable to pay tax on the remaining 1/5 i.e. 16k

Is there anything I'm missing here?

I'm personally not too worried about seeing prices drop as this would make our life simpler as we wouldn't have to pay Capital Gains Tax, so I'm certainly not speculating here on the actual increase I expect (80k is entirely hypothetical).

Edited by samtheman

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This might help: https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief

Not sure what you mean by the 18 month rule, can't find any information in this guide about that. It seems that you are entitled to relief for the months that you used the property as your principle residence and not for the ones that you didn't.

I am not a tax adviser, or anything of the sort just a bod with google

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This might help: https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief

Not sure what you mean by the 18 month rule, can't find any information in this guide about that. It seems that you are entitled to relief for the months that you used the property as your principle residence and not for the ones that you didn't.

I am not a tax adviser, or anything of the sort just a bod with google

The final 18 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.

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