Prior to April 2015, if you did not formally elect for your original house to continue to be treated as your ‘Main Residence’ for Capital Gains Tax (CGT) purposes for the period during which you lived in the rented accommodation, you would have lost a year’s worth of CGT relief when you finally did come to sell your property. While the extra CGT may not be material in the scheme of things, there would be a very real risk that you would forget the year’s absence by the time you come to sell it (or not realise its relevance) and simply/reasonably expect a CGT free sale, which would result in you completing your Tax Return incorrectly and open you up to all sorts of potential penalties, interest and exposure to HMRC’s darker side.
Fortunately, since April 2015, the simple fact of renting a second property while your real house is being refurbished does not cause you to lose the CGT relief automatically so you no longer have to make the election.
The CGT Principal Private Residence relief can be very complex and with new rules from April 2020 requiring property disposals to be reported and the tax paid within 30 days of the sale, this will only become more difficult to get right so it is important to speak to your tax advisor about any change in living patterns or if you consider selling.