Renting out part of your home may affect Capital Gains Tax when you sell. Therefore if you have tenants in your home, it is essential to understand the Capital Gains Tax (CGT) implications.

Typically, there is no CGT on the sale of a property used as your main residence due to Private Residence Relief (PRR). However, if part of your home has been let out, your entitlement to PRR may be affected.

Homeowners who let out part of their property may not qualify for the full PRR, but they could be eligible for letting relief. Letting relief is available to homeowners who live in their property while renting out a portion of it.

The maximum letting relief you can claim is the lesser of the following:

•  £40,000 
•  The amount of PRR due 
•  The chargeable gain made on the part of the property let out.

It’s important to note that if you have a lodger who shares living space with you or if your children or parents live with you and pay rent or contribute to housekeeping, you are not considered to be letting out part of your home for tax purposes.

If you have any questions on CGT, PRR or Letting Relief, or need advice on any aspect of tax, please get in touch. 

Internet link: GOV.UK