Most investors are aware that no Capital Gains Tax (CGT) is payable on a property that is your home, due to ‘Principal Private Residence Relief (PPR).  But, did you know that clever use of the ‘Main Residence’ election can enable PPR to be claimed on a second property, as well as your normal home?

Taxpayers can elect for a second property to be treated as a ‘main residence’.  This second property must be actually available as a second home i.e. not be rented out at the time the election is made.

A ‘residence’ is a property in which a taxpayer ‘lives habitually’ and so some actual occupation of the property is needed, although this may only be occasional i.e.  the second property does not have to be the one that is used the most.

The Main Residence election can also be made before OR after a period of letting, and can also be used for overseas properties.  If the property has also been let at any time, Lettings Relief of up to £40k per person may be claimed.

The election to treat a second property as a main residence must be made within 2 years of the property becoming available, and can be backdated to that date.  Professional advice should be taken to ensure the use of elections is made carefully, and in the correct way, to HMRC.

Contact Stephen Fay ACA at Fylde Tax Accountants for specialist advice on all aspects of property tax:

Tel: 01253 350 123
Email: stephenfay@fyldetaxaccountants.co.uk