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Thanks to a loop hole in capital gains tax, those people who have been forced to rent out their property may find that they are in line for a tax windfall when it comes to selling up.

According to the Daily Mail, unlike buy-to-let landlords who are selling investments, those selling their former home will have a reduced capital gains tax bill if their home makes a profit.

There is of course, no tax to pay when selling your main home, but a loop hole in tax rules allows those who have been forced to become landlords to continue to get relief against capital gains tax for three years. That means if you have genuinely lived the property, when it comes to selling, as long as you have lived in the property three years before, all your gains are tax free. Also, you can get a further £40,000 in private lettings relief, which applies only when letting your former home.

So you get tax free benefits for every year you lived in your home, plus three years of renting the property, and then another £40,000 on top of that. Mike Warburton, a tax adviser at Grant Thornton accountants told the paper: "People don't realise the advantages that a period of living in a home you later sell can bring." The Mail says he is always dealing with landlords with second homes who want to elect them as their main residence.

He adds: "You have to be careful about trying to achieve this retrospectively. This has to be real, it can't be faked, but there are huge advantages to living in a home before letting it."

SOURCE: Daily Mail, 11/06/09

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