CGT on the sale of a former holiday let

March 2nd 2023

You have decided to sell a property that until two years ago was let as holiday accommodation. Since then, you and your family and friends have used it for the occasional weekend. Does the special lower rate of capital gains tax still apply to the gain you make?

As you’re probably aware, higher rates of capital gains tax (CGT) apply to taxable gains made by individuals on the sale of residential property. The rates are 18% and 28% respectively for basic and higher rate taxpayers.

BADR and property businesses
An exception to the CGT rates applies if a gain relates to business assets which qualify for business asset disposal relief (BADR). For this purpose, furnished properties rented out as holiday accommodation, furnished holiday lets (FHLs), count as business assets. A property must be let on certain terms and for minimum periods to qualify as an FHL. Where FHL status applies, gains relating to the sale of a property can qualify for BADR.

Where an asset that was used in a business is sold within three years following the cessation of that business, the 10% business asset disposal relief tax rate applies, subject to the usual conditions. Remember, the date of sale is the contract date and not the date of completion.

If you would like further advice do get in touch with JRW to fully discuss the implications.