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 taxadvisor.uk Your Own Question

taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4939
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
54961312
Type Your Tax Question Here...
taxadvisor.uk is online now

Hello! I have a house I am considering either renting out or

Resolved Question:

Hello! I have a house I am considering either renting out or selling. I always thought that CGT would retroactively apply on any period where this house is not my primary residence (as in a period where it was entirely rented out). But now I hear that if one moves back in to a place, in other words it becomes one's primary residence again, for a minimum 6 months, then zero CGT is chargeable. This would represent an enormous difference in potential liability as the house in question is in Chelsea and can be subject to rapid increases in value. It would be absolutely wonderful to know definitively how CGT is applied.

Also, briefly, if it is the case that CGT can be effectively nullified by living in a place again for 6 months, are you aware of any planned legislation to close that 'loophole' (if indeed it can be considered a loophole)? And lastly if I mortgage a property that is being rented out, in other words I no longer really own it, how is CGT applied should I eventually come to pay off the mortgage and sell?
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Please advise if the property is your main residence at present. If not, has it been your main residence ever and for how long.

Many thanks
Customer: replied 3 years ago.

Thank you for your attention. The house is my main residence.

Expert:  taxadvisor.uk replied 3 years ago.
Joseph, thank you for your prompt reply.

[q]

Hello! I have a house I am considering either renting out or selling. I always thought that CGT would retroactively apply on any period where this house is not my primary residence (as in a period where it was entirely rented out). But now I hear that if one moves back in to a place, in other words it becomes one's primary residence again, for a minimum 6 months, then zero CGT is chargeable. This would represent an enormous difference in potential liability as the house in question is in Chelsea and can be subject to rapid increases in value. It would be absolutely wonderful to know definitively how CGT is applied.

[a]

As the property is your main residence at present, if you decide to rent it out for a period before selling it you would be entiltled to relief as follows:

All period covered as main residence – private residence relief 100%

Final 18 months of ownership – additional relief 100%

As the property would have been your main residence at some point during period of ownership, you would also be entitled to letting relief to cover period let, to a maximum of £40,000.

More information on private residence relief is covered on HMRC worksheet HM283 here

http://www.hmrc.gov.uk/helpsheets/hs283.pdf

[q]

Also, briefly, if it is the case that CGT can be effectively nullified by living in a place again for 6 months, are you aware of any planned legislation to close that 'loophole' (if indeed it can be considered a loophole)? And lastly if I mortgage a property that is being rented out, in other words I no longer really own it, how is CGT applied should I eventually come to pay off the mortgage and sell?

[a]

There is no CGT payable on sale of a property that is your main residence as all gain is covered by private residence relief. This may not be the case if the property is not your only or main residence throught out the period of ownership.

As far as mortgaged property is concerned, outstanding loan has no bearing on CGT as the tax is based on gain on realisation irrespective of debt/equity ratio of the property value.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Very helpful. The only problem I have is where you say 'this MAY not be the case if the property is not your only or main residence throughout the period of ownership'. Why can you not say 'this will not be the case if the property is not your main residence throughout...' Please if you can, quantify that 'may' - as that is where my central question lies. I understand if it is a rather involved area, just whatever you can do!

Customer: replied 3 years ago.

Oh and also, with the mortgage question, I was really referring to the ownership of the house rather than ratio of equity to value. Is it not the case that if I take out a mortgage on the property I relinquish ownership to the mortgagor?

Expert:  taxadvisor.uk replied 3 years ago.

Joseph, thank you for your reply...

The reason why I say this may not be the case because it would depend on
- total period of ownership
- total period covered under private residence relief
- period let
- actual amount of gain

If after adjusting for 1 and 2 above the total gain was below £40k plus the gains allowance (currently £11k) then there is no CGT payable.

Ownership remains yours but the lender has first charge on the property to cover the loan until the loan is repaid.

I hope this is helpful and answers your question.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4939
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
taxadvisor.uk and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

That absolutely answers it, thank you very much!

Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • 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
  • 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
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.co.uk/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.co.uk/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.co.uk/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.co.uk/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.co.uk/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions