How long do I need to be there before I sell it (or put it on the market?) in order to avoid capital gains?
You can sell it now but he liable for capital gains tax.
If you want to be free from it totally you need to be there for 3 years.
However less than 3 years it is pro rata for the time you have been there.
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.
So assume your gain is say £36,000 (for making the numbers easy)
If you sold in month 1 then you would pay CGT on the whole of the £36,000
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?
If you sold in month 10 you would pay CGT on £24,000
Not quite - you get tapered relief if you already have a main home
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
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.
Ok - the home now will be tax free assuming you have lived there 3 years.
So I don't need to move back into the property at all then? - Provided I lived in it before letting it out?
For property 1 which is your current home
Lets just clarify
You have 2 propertities
No, I'm asking about the property I lived in for 6 years, before renting it out
How long have you been living in each
I know that my current home will not be liable for CGT as I have never rented it out, and always lived in it.
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.
The new property would be 3 years as well. You can't buy a property, live in it sell it, get another etc.
You would need to live in for 3 years or get tapered relief as the formula above.
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.
Of course - there is also a tax free allowance.
Of course it will depend on which tax year you are into.
I will be selling it after the tenants move out in July 2014.
As and when the rules change in April then it will be in the year you complete your return and make a gain.
I have excluded the tax free bit to make life easier on working out numbers.
A few months would be generally a minimum of 3
But dont forget if you move into a property that was rented to sell it and make a gain, you may face an enquiry
Can I clarify anything for you about this today please?
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?
As long as HMRC accept a few months as being that period
so really it is open to interpretation?
The longer the better
If I immediately put it on the market - presumably I will be liable?
Not until sold.
That is when the gain is made.
Would I be liable for the increase in value during the time it was my home - for 6 years prior to letting it?
I am a Solcictor not a tax accountant, so I can't answer the technical details so bear that in mind.
Your gain is going to be the difference between purchase and selling
Yes - perhaps I need to approach an accountant - it's just that I entered the enquiry into Google and you name came up!
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.
I think you are wrong about the time I lived there - I think there is relief for the time when it was my home.
Isn't that what I said? I thought I did? Perhaps I was not clear
Sorry, but I don't understand your last comment about transferring a free gain?
Ok - you can't keep switching one to the other and expect free gains on everything
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.
You move to property you have sold - that is a free gain
You need to live for a period in the now rented house
Once you do, that would be a free gain
Can I clarify anything else?
please see above
Yes there is a relief - it is called tapered relief
I will try and contact a tax specialist.
Can I assist with anything else today?
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/
I don't think you shoudl really have taken this on - as it is not your area of expertise.
Thank you for your bad service rating - I wish you luck