Q. I am thinking of selling a flat that has been let since I acquired it in 2012. I do not own another property. My tenant is moving out soon, after which I will either stay in it myself or sell it. Will I get lettings relief to reduce the capital gains tax (CGT) payable?

A. Lettings relief only applies if you have lived in the property as your main home for some period. So if your tenant moves out and you sell the property immediately you will not get lettings relief, or any relief from CGT, other than the annual exemption.

However, if you move into the property and make it your own home, the gain relating to your period of occupation will be free of CGT. The last 18 months of ownership will also be free of CGT even if you are not living in the property during that period. The total gain on sale can also be reduced by lettings relief, which is limited to the lowest of these three amounts:

- the part of the gain which is exempt because the property was your main home;
- the gain attributed to the period it was let; and
- £40,000.

There are thus large tax savings to be made by occupying the property as your main home, but you must show that you intended the property to be a permanent residence, not a temporary occupation while the property was on the market. It is the quality of occupation not the length of time that demonstrates the property was your main home.