• 18 Dec 2023
• •
• 2 min read

PRR Nominations for CGT

It is widely known that you will not pay Capital Gains Tax (CGT) when you sell your main residence (subject to a number of specific exclusions). But what happens when you have one or more property that you consider ‘home’.

CGT is chargeable when you sell a property for more than you paid for it, with the current rate of CGT being 18% or 28% (depending on your income) on any gain above your personal allowance of £6,000. CGT does not apply when you sell your main residence as you will automatically get a tax relief called Private Residence Relief (PRR). However, this relief can only apply to one property at any time and you therefore may be caught with a CGT bill if you sell a second home, despite it being used for some of the time as your main residence.

It is possible to nominate a property as your main residence so that this property will qualify for PRR. It is worth noting that for the purposes of CGT, married couples can only have one property that attracts PRR. This nomination must be made within 2 years of acquiring your second home, and then again every time your combination of homes changes.

You can alter this nomination at a later date, but you will not attract PRR for a property for the period in which another property is nominated. If a nomination is not made, and one of your properties is sold, then your main residence will be determined on the facts by looking at the time spent in each residence.

Example:

Mr. X and Miss Y are due to get married. They both own their own property which they currently occupy as their main residence. When they get married their intention is to split their time equally between each property. 1 year after their marriage they decide to sell Mr. X’s property. As it is within 2 years of their marriage and therefore since their combinations of homes changed, they decide to nominate Mr. X’s home as their main residence. The property sells for a substantial gain, however no CGT is payable as it attracts PRR for the duration of Mr X’s ownership. They now own Miss Y’s property as their sole main residence (n.b. if they sell this property in the future PRR will be reduced proportionately to take into account the time Mr. X’s property was nominated).

Our team of solicitors are experienced in helping you complete the process as quickly and smoothly as possible. If you have any queries regarding wills, lasting powers of attorney or estate/tax planning or would like more information, call our team today on 0800 2800 421.