Election to treat property as main residence

There are a number of issues that owners of more than one home should be aware of. An individual, married couple or those in a civil partnership can only benefit from CGT on one property at a time. However, it is possible to choose, by election, which property is treated as a main residence and therefore benefits from a CGT exemption when sold.

When a home owner lives in more than one property, they must inform HMRC which property is their main residence. There are special rules which determine the timing and frequency of making such an election. The home owner must make a ‘nomination’ within two years of changing the number of properties that they occupy. A new nomination should be made whenever the number of homes a taxpayer lives in changes.

For example, a taxpayer lives in Manchester and purchases a second home in London in February 2019. The home owner can nominate either property as his main home provided this is done within two years i.e. by February 2021. Where the taxpayer does not make a nomination within 2 years, HMRC will decide which is the main home based on the facts. This may significantly affect the amount of CGT to be paid.

Home owners that are married or in a civil partnership and own two or more homes between them must make a joint nomination and are only entitled to Private Residence Relief on one home.

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