Capital Gains Tax

[Crisp]

I have two houses. Number One is my main residence and Number Two has been rented out for five years. Selling Number One incurs no Capital Gains Tax as it is my main residence. If I move into Number Two, how long must I live there before I can also sell this without incurring Capital Gains Tax?

[kags]

When you move into house number 2 it becomes your principal private residence (PPR) (provided you don't just stay there for a nominal period), so the period of ownership from that date will be exempt from capital Gains Tax.

The period when the house was let will remain chargeable to CGT, subject to reliefs. The last 36 months of ownership are always exempt, so if for example you sold after a year of living there, you would get 2 years of the letting period exempt too. There is a lettings relief of up to �40,000, although the calculation is complicated. There will also be taper relief, and reductions for capital improvements, costs of purchase and sale, and your annual exemption.

The apportionment of the gain is done on a strict time basis ie number of months), rather than looking at actual growth in value during specific periods.

So to answer your question, you cannot remove the 5 year period of letting from CGT, but there may be sufficient reliefs available to reduce the gain chargeable to tax significantly.