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Tax Tip

Principal Private Residence Relief

When an individual disposes of a dwelling house, which some time during his period of ownership has been his main or only residence, then part or all of the gain will be exempt from capital gain.

Ownership of the property that could have been used as a home  is insufficient. It is necessary to reside in the home.

If a taxpayer has more than one residence, he may elect in writing to treat one of them as his main residence  for CGT.

Where a married couple are living together, there can be only one sole or main residence and they must together elect which it will be.

The election is entirely at the taxpayer’s discretion, and does not depend on which residence in fact is used as the taxpayer’s main residence.

The last three years of the period of ownership qualify for relief regardless of whether the property was the individual’s only or main residence during those three years.

Where a dwelling house has been occupied throughout only part of the period of ownership or main residence only a part of the gain is exempt.

Grounds or garden up to half a hectare will qualify for relief. The size and character of the house determine the extent to which any excess grounds are allowable.

The exemption applies only for the purposes of capital gains tax, not inheritance tax.

This is a complex area of taxation and if you have more than one property that you use as a residence then you may need to plan ahead to avoid any significant Capital Gains Tax.

Please call us if you would like to know more about this area of Tax Planning.


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