Capital gains tax on sale of (current) principal residence?

My in-laws are in the process of building a new house and had intended to sell their existing home prior to moving. Given the current difficulties of selling, they're considering moving into the new house and renting out their existing house for a few years until it becomes easier to sell.

At the point at which they would sell what would, by then, no longer be their principal residence, what would be the implictions for CGT. Would any such calulation be made done on the basis of:

1. the appreciation of the property over the lifetime of their ownership (they've had it since 1999) or,

2. any appreciation that occurred between the point at which it was no longer their principal residence (i.e. now) and the time it is eventually sold.

Grateful or any steer.

CGT is calculated roughly by deducting the purchase price from the sale price, and taxing the profit.

But you are entitled to relief for the number of years used as a PPR- so if it was their ppr for 11 years, and rented for 4, then they would be liable only for 3/15 of the tax ( the first year after it is no longer their PPR is ignored, although some experts might disagree and there is some debate on this point).

Also deduct legal fees and auctioneering fees on purchase and sale, any capital enhancement, small gains exemption, and the initial purchase price can be indexed ( there is a table of multiplication factors).

But renting it out means they are liable for income tax on the rent, nppr levy, prtb registration, the pain of tenants etc.

Hi Vanilla

Many thanks for your very comprehensive and helpful reply.

S