For capital gains tax purposes, does it matter whether a bedsit…

HiCustomer

There may be more exempt periods to consider - and I know the following is alot to take on - but I want to be sure you have all the factors available to you

If when you first purchased this property - it was just your home - then there will be a period of time that the private residence relief is due for as well as the period when the property is just you again. But another interesting aspect of Capital Gains, is that if the lodgers did not have exclusive use of more than their bedroom - then it can be argued that capital gains will not be due (but you would be best placved to engage an acxcountant to argue this for you)

The botXXXXX XXXXXne is have you been running this as a business - and not just rental income being declared, which I know could be argued to be the same thing - so HMRC will ask

If you have just had lodgers and you received rent - and they had free use of the rest of the home, that they shared with you and everyone else, then there ill not be again to worry about.

If however this was a trading business that was bought for the purpose to rent out rooms (even though it was your own home) then you may find Capital Gains will apply.

But even if Capital Gains did apply - there is good news to reduce this liability

The whole time of ownership will be looked at - and the time that you were sole resident will not be liable and the time that there were lodgers will be apportioned in terms of rooms rented/total rooms and against this part of the gain you will qualify for lettings relief up to a maximum of £40K

So for example house bought 1999 for £200,000 and is sold 2010 for £400,000

Rented rooms out for period 2003 to 2009 and 4 rooms out of total of 10 rooms

5 years just you

6 years with lodgers 4/10ths of rooms

Total ownership period 11 years

Capital gain £200,000 x 6/11 (represents loger and total ownership) = 109090

109090 x 4/10ths to represent rented part of house = Gain £43,636

Lettings relief allows a maximum of £40,000 less 40,000

Gain 3,636

However each individual has an annual exemption of £10,100 (for 2009/10) so as this gain is under this figure there would be no Capital Gain to pay.

I would strongly advise you to seek an accountant that specializes in Capital Gains, to ensure the calculation is undertaken accurately - but I do not think there is too much for you to worry about, but it is good to get it completely right.

On the last point you raised

The three years applies if you sell a home that has been you main residence then you have three years from it not being your main residence to sell it, before Capital gains comes into play. This will apply to you - regardless of you having let out rooms in the past. But isn't used to wipe out last three years when it is still your main home

Thanks

Sam