Hi.Can you tell me which month in 2001 you bought the property please.
Thank you for your reply. I purchased it in July 2001.
OK thank you Tony.
Hi again.By April 2014, you will have owned the property for 154 months. Of that, you will have lived in it for 123 and let it for 31. If you exchange contracts to sell it by 5 April 2014, all the gain will be exempt from CGT under the main residence and last 36 months rules. These figures take no account of any improvement expenditure you incurred.However, with effect from 6 April 2014, the last 36 month exemption is being reduced to a last 18 month exemption. If you exchanged contracts to sell the property on 6 April 2014, the position would be as follows:You will make a gain of £887,500 (£1,200,000 - £312,500). The expenses of purchase and sale (legal fees, stamp duty, survey fees, selling agent fees etc) are all deductible expenses which will reduce the gain from £887,500. The gain for the period the property was your main home will be exempt from CGT as will the gain for the last 18 months of ownership. That will account for £812,581 (£887,500 / 154 x 141). The remaining taxable gain of £74,919 will be that part of the letting period gain which is not covered by the last 18 months of ownership (£887,500 / 154 x 13).As the property will have been both your main home and it let you will be entitled to letting relief which will be the lesser of:1 £40,000,2 the sum of the main residence gain and the gain for the last 36 months of ownership of the property which is £812,581 and3 the letting period gain of £74,919.Letting relief of £40,000 will reduce the remaining taxable gain from £74,919 to £34,919 and the £11,000 annual CGT exemption will reduce it further to a net taxable gain of £23,919.There are two rates of CGT, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year of disposal of the property.If you sold the property in April 2015, having let it for another year from April 2014, the exempt gain would be £753,840 and the letting period gain would be £133,660. Letting relief of £40,000 and the annual CGT exemption of £11,000 or so would leave you with a taxable gain of £82,660.If you sold the property in April 2016, having let it for another two years from April 2014, the exempt gain would be £703,020 and the letting period gain would be £184,480. Letting relief of £40,000 and the annual CGT exemption of £11,000 or so would leave you with a taxable gain of £133,480.If you sold the property in April 2017, having let it for another three years from April 2014, the exempt gain would be £658,618 and the letting period gain would be £228,882. Letting relief of £40,000 and the annual CGT exemption of £11,000 or so would leave you with a taxable gain of £177,882.Clearly, tax rules can and do change so you should be aware of that.I hope this helps but let me know if you have any further questions.
Thank you very much Tony for that clear and extensive response. Just one final question; is the 'last 36 month rule' taken from the 5th of April in the year that my property is rented out or is it from the date in which it no longer became my main residence (9th Sept 2011). From your explanation it looks like it's counted from the beginning of the tax year in which I moved out rather than the actual date that I moved out!?
Thank you very much Tony. Much appreciate your thoroughly explained advice. I was very happy with your service so added a small tip for your hard work. :)