Tax implications of selling if you split your time across two homes

When selling your property, it's important to take taxes into consideration especially as your options will change if you own more than one home.

First published in The Scotsman

24 May 2024

House keys changing hands

Selling your property is often considered one of the most stressful life events a person can experience. The moving boxes and updated records are one thing, but adding tax into the mix can make matters somewhat overwhelming.

Thankfully, when you sell your main home, you generally do not pay capital gains tax (CGT) on any profit made. This is due to what is known as “principle private residence relief” and provided a property has been your main residence throughout your period of ownership, it should apply to prevent any gain from being taxed.

So where does this leave individuals who split their time across two properties? 

For those people who own more than one property, HMRC recognises that it is possible to have more than one home at any one time, for example where you split your time across two locations due to work or family commitments. If this applies to you, and you sell one of the properties, you need to work out which has been your main residence across the period of ownership to decide if relief can be claimed (in full or in part).  

Ultimately this is a question of fact depending on how you use your properties. It is also possible to make a ‘main residence nomination’ in which you declare to HMRC which of the properties you wish to treat as your main residence for CGT purposes.  

Problems can also arise in cases where someone owns only one property, but they have not lived in it for the entire period of ownership.  In these circumstances, relief generally only covers the proportion of the gain relating to the period of actual occupation. 

For some taxpayers, this can therefore give exposure to tax when they come to sell. Thankfully there is also some leeway built into the rules to provide additional deemed periods of occupation. This includes the final nine months of ownership (which can be helpful for people who buy a new home before selling their existing property) as well as other periods of absence that fall between periods of occupation. This can include periods of up to three years for any reason and certain longer periods for absences due to work. 

While these additional deemed periods of occupation are helpful, it should be noted that they only apply in limited circumstances and so people selling a home which they have not lived in for the full period of ownership should check their position carefully. They should also consider that if tax is due, it must be reported to HMRC within 60 days of the sale completion.

In short, hope is certainly not lost when it comes to obtaining relief on the sale of your home if you have not always lived in it. However, it is important to consider your position carefully to ensure the correct steps are taken – if you can find the time amongst the packing and redecorating plans!