Capital gains tax: Principal Private Residence elections


In March 1999, I purchased a house in Brighton (jointly with my wife) for £220,000. It was lived in by both of us until July 2011, when we purchased a house in London for £385,000. Since then, I have lived mainly in the London house, as I work in London during the week. My wife continues to mainly live in Brighton. We spend the weekends together, either in Brighton or London.

In May 2013 we sold the Brighton house for £425,000, and bought another house in Brighton for the same amount.

None of the properties have ever been let. Both properties are mortgaged.

We are considering electing one of the properties as a principal private residence (PPR), which one is best to nominate, and the options available to us to reduce / mitigate CGT.

HomeI understand that we could have elected within 2 years of the purchase of the house in London. Are HMRC likely to accept an argument that the original house in Brighton was our principal place of residence for 14 years and presently this remains the case for its replacement? To avoid the potential for CGT on its sale we would like it to be elected as our PPR at this time. Is this possible? Am I correct in thinking it is possible to backdate up to a maximum of two years?

Longer term, the value of the London house, by virtue of it being in London, is likely to increase substantially more than the Brighton house. On retirement, the house in Brighton is the one most likely to be sold, so having it as our PPR at this time for the purposes of avoiding CGT is preferable.

In making a declaration of PPR, I presume that this is done via a tax return? I have not submitted a return for a while and neither has my wife. Is a self assessment needed?


As you state, when you have 2 residences, an election determining which one is the main residence may be made within 2 years of a particular combination of residences coming into existence. For you, this was in July 2011 on the purchase of the London property, and therefore the time limit for an election on these 2 residences has now expired.

You appear to have a preference for the first Brighton property to be your main residence. Given that before 5 April 2014, the last 36 months of a property which has once been your main residence always qualify for relief from capital gains tax (and your first property in Brighton would always qualify for this due to the period before the purchase of the property in London), my view is that it would be better for the London property to qualify as your main residence from the time of its purchase.

In the absence of an election, the question of which residence is the main residence is determined by the facts. As I understand it, after the purchase of the London property, you lived in it as your main residence, while your wife lived in the Brighton property as her main residence. A married couple may only have one residence eligible for relief from capital gains tax, so it is necessary to find some way of deciding which residence should prevail.

Based on the information that I have, it appears to be slightly more likely that the first Brighton property would be determined to be your main residence during the period from July 2011 until May 2013, on the grounds that:

  • You owned the property for longer; and
  • The London property appears to be a convenience for work, while the town of Brighton appears to be your long-term “home”.

Neither of these factors is conclusive; with more knowledge of your own circumstances, you might have some reasons why you consider that the London property was your main residence during this time.

HMRC’s guidance states that the following list of points, although not exhaustive, may be useful in establishing which is the main residence in the absence of an election:

“If the individual is married or in a civil partnership, where does the family spend its time?
If the individual has children, where do they go to school?
At which residence is the individual registered to vote?
Where is the individual’s place of work?
How is each residence furnished?
Which address is used for correspondence?
- Banks & Building Societies
- Credit cards
Where is the individual registered with a doctor / dentist?
At which address is the individual’s car registered and insured?
Which address is the main residence for council tax?”

On the purchase of the second Brighton property in May 2013, a new combination of residences arose, and you have a new 2-year window in which to make an election. Based on its increase in value, I would be inclined to nominate the London property initially as the main residence, but much will depend on whether the London property is determined to be the main residence from the time of its purchase, and your plans for the future. The key point though is that once an election is made, it can be varied at will at any time, and any variation can be backdated for 2 years. The first election therefore gives you more options for the future, and should certainly be made on one or other of the properties.

An election is not made on tax returns, but rather by writing a joint letter to HMRC, quoting your national insurance numbers, or 10-digit tax reference numbers if you still have them. There is no prescribed format for this, but a sample wording might be:

“Dear Sir

Would you please accept this letter as notice under Section 222(5)(a) of the Taxation of Chargeable Gains Act 1992 that we are nominating our residence at [address] to be our main residence with effect from [date]. This property became one of a new combination of residences on [date].

Yours faithfully

[signed by both]”

The date can be any date within the last 2 years. In your case, I think it would be best to nominate the date when the second Brighton property first became a residence. This might be immediately on purchase, or it might be shortly afterwards; it depends when you took up actual residence in that property.

Mortgages have no relevance to capital gains tax.

2 Comments (oldest first)

  1. Britannia Gold

    I am a HRT can I offset carried forward rental losses on my personally owned BTL against the reduced BTL mortgage interest relief?

    11 September 2016

  2. Admin

    Rental losses carried forward are automatically offset against the next available rental profits of the same rental business.

    11 September 2016