Capital Gains - Lettings Relief

[nobfelt2]

Can anyone explain what lettings relief is with regard to Capital Gains Tax? just heard of it but no idea how it effect me.

Thanks

[kags]

The most important thing is that the relief is only available if you have at some point lived in the property as your Principal Private Residence. If this is the case, then part of the Capital gain arising when you sell the property will be exempt - the rules are complicated but broadly this means the actual period in which you lived in the house, plus the last 36 months of ownership. There may be other qualifying periods as well.
You are then left with a chargeable Capital Gain, from which lettings relief can be deducted. The relief is the LOWEST of
- �40,000
- the amount of Principal Private Residence Relief given
- the actual amount of Gain attributable to the period of letting.
This latter figure is open to some interpretation, but is essentially there to make sure the relief doesn't exceed the chargeable gain arising.
There will also be taper relief available.

[nobfelt2]

Thanks kags. I lived in the property for 2 years (from 2000 to 2002 )and paid �38,000 for it, I think I could sell it now for �80,000-�85,000.
�42,000-�47,000 taxable gain.

So if I rented it out for 4 years (48 months) from 2002 to 2006, the relief will apply to all but 1 year (12 months), i.e. the first year of rental?

So therfore, can I claim relife for 5/6ths of the time I have owned it?

Thanks

Steve
Am I on the right lines?

[kags]

Essentially yes, although the Inland Revenue will want the calculation done in months. In your example, (�47000 gain)the gain after Principal Private Residence relief would be �7834, which would qualify in full for lettings relief, so no tax payable even if your Annual CGT Exemption has already been used.