Wednesday 8th March 2023
Liz at Money Bee explains what Capital Gains Tax is and the implications if you live in Service Accommodation and rent out your own property:
What is Capital Gains Tax?
Capital gains tax (CGT) is a tax that is applied to any profits you make when you dispose of something you own for more than £6,000. This can be by selling the item or swapping/giving it away. It is the gain you make that is taxed, not the amount of money received.
This can include, a second property or buy-to-let (but not your main home).
Therefore, if you are renting a property to live in and letting out your own home to someone else you should may need to pay CGT.
Service accommodation and Capital Gains Tax
However, if you are living in Service accommodation (referred to by HMRC as Job Related Accommodation) you do not need to pay CGT on your rental income.
If you are renting out your own home whilst living in Job Related Accommodation (JRA), it is perceived you would prefer to live in your own home and you live in JRA to better carry out your work duties.
This is part of the Chargeable gains Act of 1992, section 222(3C).
CGT questions answered:
Will HMRC know I’m in HM Forces and understand I don’t need to pay CGT?
They will not automatically know you are Serving and living in Service accommodation, Government departments do not share information.
There is conflicting information available on whether you need to advise HMRC of your exemption; with some references suggesting you do not need to advise them and others saying you must if you want to be exempt from paying CGT. Therefore, it’s better to tell them so you are covered.
How do I tell them?
You need to write a ‘Letter of Nomination’ to HMRC and include the following information
- The names of the owners of the property
- Their NI number
- You also need to include the address of the property you are nominating
- From what date the nomination began (this must be within the past 2 years)
Send your letter of nomination to:
Capital Gains Tax Queries
HM Revenue and Customs
It’s always a good idea to send this via recorded delivery, then call a few weeks later to make sure it has been received is attached to your file(s).
Call: 0300 200 3300 or if you are outside of the UK +44 135 535 9022, Monday to Friday: 8am to 6pm
What if I started renting out my house more than 2 years ago?!
That’s OK – most people are utterly unaware of the need to nominate a residence. Here the S222(5A) from the same act comes into play – it explains late nominations are allowed, provided all but one of your residencies during the period had a negligible capital value (for example a house you rent where someone else has invested the capital).
I receive an allowance as opposed to renting a property from HM Forces – does that count?
Yes it does. This is because HM Forces are giving you money for accommodation as opposed to the accommodation itself which, for the purposes of this, amounts to the same thing.
Other useful information
- You can only nominate one primary residence at a time.
- If you are married / in a civil partnership, you and your partner can only nominate one primary residence between you.
- Unless your rental income is less than £1000 per annum (that’s £1000 per person receiving the rental income), then you need to fill in a self-assessment to let HMRC know about it. The income must be in line with the ownership split in the deeds (or Statement of Trust if you have one drawn up).
Note: This information is correct at the time of publishing. Money Bee is not a CGT expert and does not guarantee that you will be exempt from this or any tax.
Get information specific to your individual circumstances
You are advised to contact HMRC directly if you have any queries.
See this from HMRC meaning of what JRS is (including FAM allowances):
CG64555 – Private residence relief: two or more residences: job-related accommodation – HMRC internal manual – GOV.UK (www.gov.uk)
See this for HMRC guidance on late nominations (i.e. more than 2 years):
CG64500 – Private residence relief: only or main residence: two or more residences: late nominations – HMRC internal manual – GOV.UK (www.gov.uk)
See here for HMRC guidance on late nominations:
Capital Gains Tax: Private Residence Relief: changes to the ancillary reliefs (consultation) (publishing.service.gov.uk)
See here for HMRC contact details:
Capital Gains Tax – GOV.UK (www.gov.uk)
Taxation of Chargeable Gains Act 1992 (legislation.gov.uk)