The more the merrier.
If the mortgage was taken out for the purchase or improvement of the property, relief would be available in respect of interest arising during the let period (or void periods if let subsequently). If the mortgage is replaced by refinancing, the interest in respect of the new loan would be allowable (but restricted to the interest arising in respect of the size of the orginal loan if additional borrowings were taken for non-qualifying purposes).
If a property is lived in as a main residence, then let, then lived in again, and finally sold; any capital gain would be computed as follows:
Proceeds (net of sale costs)
Less:
The purchase cost
Costs of acquisition (legal and search fees, survey fees, stamp duty etc.)
Indexation allowance (if bought prior to 31 March 1998)
Improvement expenditure
Indexation on improvements (if undertaken prior to 31 March 1998)
Principal Private Residence Relief (PPR)
Residential Lettings Relief (RLR)
Capital losses arising in the same tax year
Taper relief (from 1 April 1998)
Unused annual exemption(s)
Losses brought forward
PPR Relief arises on a monthly basis in respect of the period of residence, periods of permitted absence and the last 36 months of ownership. The gain is apportioned between qualifying months and non-qualifying months over the period of ownership.
RLR arises where a propoerty is a main residence and the let and is the lesser of £40,000 or allowable PPR Relief.
It can therefore be seen that where a property is lived in as a main residence, and the let, there are a substantial number of reliefs and allowances available so that it is quite possible that the whole gain would be extinguished.
Please refer to me if you need bespoke illustrations.
Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk