Q. I let out a room in my home to a lodger, and I also run my self-employed business from another room in the same property. When I sell the property, will I be taxed on a portion of the gain that relates to the rooms that have been used for my business and by the lodger?
A: The gain you make from selling your own home is generally free of capital gains tax (CGT) if you have occupied the property for the entire period of ownership, with an additional CGT exception for the last nine months of ownership. You are right to assume that where part of the property is used for business purposes, a proportional amount of the gain may be taxable.
However, this only applies if part of the property is used exclusively for business purposes. Where your workroom is sometimes used for another purpose, say as a space for your children to do their homework, the room will not be exclusively used for business, so the gain on that portion of the house is exempt from CGT.
Where the lodger shares some living space with you, such as the kitchen, the letting of the room to the lodger is fully covered by the exemption from CGT.
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