UK Tax – Chattels & Principle Private Residence Exemption

1. Jewellery / Paintings / Antiques etc are non-wasting chattel

Calculated by:

Purchased for <£6000, Sold for <£6000 they are exempt

Purchased for <£6000, Sold for > £6000 do regular calculation but the gain is limited to a max of 5/3 x (Gross Proceed i.e selling price – 6,000 <– this figure is fixed)

Purchased for >£6000, Sold for <£6000 i.e a loss, the items DEEMED gross selling amount is £6000 regardless of the amount it was sold for

Purchased for >£6000, Sold for >£6000 you just do your regular gains calculation

2. Wasting Chattel

A wasting chattel is a chattel with a remaining useful expected life of <50 years and is expected to depreciate in value e.g a copyright

Calculated as:

Proceeds of sale
Less depreciated cost (Original cost x Useful life remaining/life remaining at acquisition)

Example. Copyright had 40 years to expire and purchased for £10,000 on 1.1. 2010. Sold for £20,000 on 1.1.2020.

Sales Proceed 20,000
Less:
10,000 x 30/40 = 7500
Gain 12500

Private Residence Relief

Number of months deemed as living in property / Total months ownership of property x Gain

You are deemed to live in the property:
– for the last 18 months no matter what
– 3 years for any reason as long as you’ve lived in the house AFTER that period you weren’t occupying the house
– 4 years for working away from home in the UK
– Any amount of time working abroad

The rule of having to occupy the house after that “deemed occupancy” is relaxed for the working elsewhere in the UK and abroad IF your employment terms meant you couldn’t move back into your home

Letting relief

If you let out your property during your periods that cannot be deemed as occupation, you can claim lettings relief. It is the lowest of:

Your principal residence relief
The gain attributable to the time of let i.e period of let/total ownership x gain
£40,000

PPR is also limited to the residence part of a home. If you used your home for business use, that part of it will always be taxed and receive no relief EXCEPT for the last 18 months of ownership.