We have owned our family home for around 25 years, but it has been let out for the last seven years as work took us overseas. However, we intend to return to the UK and the house in the next year or so. How long will we need to live in the property again (before selling) for us not to be liable to capital gains tax (CGT)? If we sell prior to this period lapsing, my understanding is that CGT would be payable on any capital gain during the let period. Is this correct, and where would these valuations be taken from? 

Arthur Weller replies:  

If you look at HMRC's Capital Gains manual (see tinyurl.com/4nzjneee) it states: “The legislation does not specify how long the period of residence must be. CG64435 explains that it is quality of occupation rather than length of occupation which determines whether a dwelling-house is its owner’s residence. Similar considerations apply here. It is not possible to set a minimum period of occupation which will be enough to allow relief for a period of absence. Both before and after the period of absence, the dwelling-house must be its owner’s home and not merely occupied for a temporary purpose.” If you do not occupy the property as your main residence after your return to the UK, then you are correct; the period of absence becomes taxable. Let's say you acquired your home for £200,000 and sell it for £450,000. You have made a capital gain of £250,000 over 25 years, or £10,000 a year. So, the last seven years, or £70,000, will be subject to CGT. Less the final period exemption of nine months, equating to £7,500. So, your taxable gain will be £62,500.