How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Ash Your Own Question

Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10915
Experience:  Solicitor with 5+ years experience
75100385
Type Your Law Question Here...
Ash is online now

I have been renting out my former home for approaching 3 years.

Customer Question

I have been renting out my former home for approaching 3 years. I plan to move back in there, but then sell it. Can I avoid capital gains tax?
Submitted: 2 years ago.
Category: Law
Expert:  Ash replied 2 years ago.

Alex Watts : Hello my name is Alex and I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply, but rest assured I will be giving your question my immediate attention upon return You do not need to wait here as you will get an email when I reply.
Alex Watts : How long will you be there before you sell it?
JACUSTOMER-4pdg78uq- :

How long do I need to be there before I sell it (or put it on the market?) in order to avoid capital gains?

Alex Watts :

You can sell it now but he liable for capital gains tax.

Alex Watts :

If you want to be free from it totally you need to be there for 3 years.

Alex Watts :

However less than 3 years it is pro rata for the time you have been there.

Alex Watts :

For example if you sell it after 10 months then you would pay a portion of CGT but based on the remaining term of the 36 months, so in effect the first 10 months is tax free.

Alex Watts :

So assume your gain is say £36,000 (for making the numbers easy)

Alex Watts :

If you sold in month 1 then you would pay CGT on the whole of the £36,000

JACUSTOMER-4pdg78uq- :

I lived there for 6 years before selling it in August 2011, and then I understand I only have to move back in for a few months, for me to not have to pay CGT?

Alex Watts :

If you sold in month 10 you would pay CGT on £24,000

Alex Watts :

Not quite - you get tapered relief if you already have a main home

JACUSTOMER-4pdg78uq- :

I also understand that the law changes in April - in that you used to be able to let out a property for up to 3 years (which I have) - but after April it will be only 18 months

JACUSTOMER-4pdg78uq- :

I am selling the home I live in now, and this will complete in July 2014, and I will then move back to the house I rented out.

Alex Watts :

Ok - the home now will be tax free assuming you have lived there 3 years.

JACUSTOMER-4pdg78uq- :

So I don't need to move back into the property at all then? - Provided I lived in it before letting it out?

Alex Watts :

Yes indeed.

Alex Watts :

For property 1 which is your current home

Alex Watts :

Lets just clarify

Alex Watts :

You have 2 propertities

JACUSTOMER-4pdg78uq- :

No, I'm asking about the property I lived in for 6 years, before renting it out

Alex Watts :

How long have you been living in each

JACUSTOMER-4pdg78uq- :

I know that my current home will not be liable for CGT as I have never rented it out, and always lived in it.

Alex Watts :

How long have you been living in each

JACUSTOMER-4pdg78uq- :

I lived in the property for 6 years before renting it out in August 2011, for just under 3 years. I moved to my current home in 2011 and have been living here since then. My current home will sell in July 2014 and will not be liable for CGT. But I will then move back to the home I let out for 3 years, and need to know how to avoid CGT on that property.

Alex Watts :

I see.

Alex Watts :

The new property would be 3 years as well. You can't buy a property, live in it sell it, get another etc.

Alex Watts :

You would need to live in for 3 years or get tapered relief as the formula above.

JACUSTOMER-4pdg78uq- :

But HMRC web site quotes " few months" - that I need to live in it again, in order not to be liable for CGT - I thought it was possible to switch homes. What about the fact that the law has just changed - in that you were able to let out for up to 3 years, without penalty and from April this will only be 18 months - but I didn't know this when I rented it out.

JACUSTOMER-4pdg78uq- :

Of course - there is also a tax free allowance.

Alex Watts :

Of course it will depend on which tax year you are into.

JACUSTOMER-4pdg78uq- :

I will be selling it after the tenants move out in July 2014.

Alex Watts :

As and when the rules change in April then it will be in the year you complete your return and make a gain.

Alex Watts :

I have excluded the tax free bit to make life easier on working out numbers.

Alex Watts :

A few months would be generally a minimum of 3

Alex Watts :

But dont forget if you move into a property that was rented to sell it and make a gain, you may face an enquiry

Alex Watts :

Can I clarify anything for you about this today please?

JACUSTOMER-4pdg78uq- :

Yes please - so if I move back in to the property for 3 months - July to October, and sell it in October, will I be liable for CGT?

Alex Watts :

As long as HMRC accept a few months as being that period

JACUSTOMER-4pdg78uq- :

so really it is open to interpretation?

Alex Watts :

Indeed

Alex Watts :

The longer the better

JACUSTOMER-4pdg78uq- :

If I immediately put it on the market - presumably I will be liable?

Alex Watts :

Not until sold.

Alex Watts :

That is when the gain is made.

JACUSTOMER-4pdg78uq- :

Would I be liable for the increase in value during the time it was my home - for 6 years prior to letting it?

Alex Watts :

I am a Solcictor not a tax accountant, so I can't answer the technical details so bear that in mind.

Alex Watts :

Your gain is going to be the difference between purchase and selling

JACUSTOMER-4pdg78uq- :

Yes - perhaps I need to approach an accountant - it's just that I entered the enquiry into Google and you name came up!

Alex Watts :

Remember you are free from any free gain as the main home so it is likely to get the free gain was transferred when you moved into your new place.

JACUSTOMER-4pdg78uq- :

I think you are wrong about the time I lived there - I think there is relief for the time when it was my home.

Alex Watts :

Isn't that what I said? I thought I did? Perhaps I was not clear

JACUSTOMER-4pdg78uq- :

Sorry, but I don't understand your last comment about transferring a free gain?

Alex Watts :

Ok - you can't keep switching one to the other and expect free gains on everything

JACUSTOMER-4pdg78uq- :

You said the tax would be on the difference between purchase and selling - but I believe there is a relief for the time I lived there for 6 years. I think perhaps we need to call this to a close. Thanks anyway.

Alex Watts :

You move to property you have sold - that is a free gain

Alex Watts :

You need to live for a period in the now rented house

Alex Watts :

Once you do, that would be a free gain

Alex Watts :

Can I clarify anything else?

JACUSTOMER-4pdg78uq- :

please see above

Alex Watts :

Yes there is a relief - it is called tapered relief

JACUSTOMER-4pdg78uq- :

I will try and contact a tax specialist.

Alex Watts :

Can I assist with anything else today?

Alex Watts :

If this answers your question could I invite you leave feedback on my service which I hope has been excellent today, if you need more information or help then please click reply.

Please remember that I am always happy to help if you have future questions, even if I am in Court I can normally respond within a few hours. For future information, please start them with ‘For Alex W’.

Please bookmark my profile if you wish for future help: http://www.justanswer.co.uk/law/expert-alexwatts/

JACUSTOMER-4pdg78uq- :

I don't think you shoudl really have taken this on - as it is not your area of expertise.

Alex Watts :

Thank you for your bad service rating - I wish you luck

What Customers are Saying:

 
 
 
  • Thank you so much for your help. Your answers were really useful and came back so quickly. Great! Maggie
< Previous | Next >
  • Thank you so much for your help. Your answers were really useful and came back so quickly. Great! Maggie
  • A quick response, a succinct and helpful answer in simple English. I believe I can now confront the counter party with confidence -- worth the 30 bucks! Rick
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
 
 
 

Meet The Experts:

 
 
 
  • Jo C.

    Jo C.

    Barrister

    Satisfied Customers:

    30316
    Over 5 years in practice
< Last | Next >
  • http://ww2.justanswer.com/uploads/EM/emus/2015-7-7_192327_bigstockportraitofconfidentfemale.64x64.jpg Jo C.'s Avatar

    Jo C.

    Barrister

    Satisfied Customers:

    30316
    Over 5 years in practice
  • http://ww2.justanswer.com/uploads/BE/benjones/2015-12-1_0437_ennew.64x64.jpg Ben Jones's Avatar

    Ben Jones

    UK Lawyer

    Satisfied Customers:

    11553
    Qualified Solicitor - Please start your question with 'For Ben Jones'
  • http://ww2.justanswer.com/uploads/BU/Buachaill/2012-5-25_211156_barrister5.64x64.jpg Buachaill's Avatar

    Buachaill

    Barrister

    Satisfied Customers:

    1754
    Barrister 17 years experience
  • http://ww2.justanswer.com/uploads/JO/jojobi/2013-3-19_0265_maxlowryphoto.64x64.jpg Max Lowry's Avatar

    Max Lowry

    Advocate

    Satisfied Customers:

    894
    LLB, 10 years post qualification experience
  • http://ww2.justanswer.com/uploads/UK/UKLawyer/2012-4-12_9849_F2.64x64.jpg UK_Lawyer's Avatar

    UK_Lawyer

    Solicitor

    Satisfied Customers:

    750
    I am a qualified solicitor and an expert in UK law.
  • http://ww2.justanswer.com/uploads/KA/Kasare/kasare.64x64.jpg Kasare's Avatar

    Kasare

    Solicitor

    Satisfied Customers:

    402
    Solicitor, 10 yrs plus experience in civil litigation, employment and family law
  • http://ww2.justanswer.com/uploads/OS/osh/2015-7-7_19268_gettyimagesb.64x64.jpg Joshua's Avatar

    Joshua

    Lawyer

    Satisfied Customers:

    8199
    LL.B (Hons), Higher Prof. Dip. Law & Practice
 
 
 

Related Law Questions