Residential Letting
A further relief is given if your main residence has been let as residential accommodation during the period of ownership. The case study below best demonstrates the operation of this.

The letting exemption can be very valuable but is only available on a property that has been your main residence. It is not available on a ‘buy to let’ property in which you never live.

Case study
Frank bought a property in 1990 and lived in it as his main residence for eight years until 1998. Then he bought a second property which immediately became his main residence and the first property was let from then until its sale in 2004.

The gain on sale of the first property amounted to £210,000.

Exempt as main residence

The balance of the gain (£45,000) relates to the period from 1998 to 2001. The property was let during this period and had previously been Frank’s main residence so that the letting exemption is available. Although the gain relating to this period amounts to £45,000 the exemption for letting is limited to a maximum of £40,000.

Overall £205,000 of Frank’s gain is exempt leaving only £5,000 chargeable to tax and this is subject to taper relief and the annual exemption so that it is unlikely he will have to pay any CGT.