Can anyone explain what lettings relief is with regard to Capital Gains Tax?
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.
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