Question:
I own a 4 storey semi-detached house. The building was converted into 3 flats in the 1980’s. I live on the lower two floors and rent the top two. I have bought them over the last 19 years. The increase in value over this period is substantial. I was going to convert the flats back into a house and build an extension which I have permission for. If I then sell the house what CGT am I liable for, and how do I minimise any CGT?
Arthur Weller replies:
If you do, as it appears from your question, i.e. selling the whole house soon after the completion of the conversion and extension, then I think you will only be eligible for principal private residence (PPR) relief on the lower two floors that you actually lived in for many years, but the upper two floors will be subject to regular CGT, and the extension may be subject to income tax.
See the section www.hmrc.gov.uk/manuals/cgmanual/CG65200+.htm on the HMRC website. However if you live in the whole 'new' house for a period of time, e.g. some years, then the extension should be subject to CGT and eligible for PPR relief, and the two upper floors eligible for partial PPR relief.
