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Sam
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Category: Tax
Satisfied Customers: 13866
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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We own a UK property as principal private residence for the

Resolved Question:

We own a UK property as principal private residence for the past 31 years.
We will move abroad next year and intend to let out our property.
We understand that from next year it will only be allowable to let for a period of 18 months before CGT tax applies.
Our question is that if we let the property for a longer period, will CGT on any future sale be calculated on the basis of the pro rata period of principal private residence versus period when let out comercially.
As house purchased long ago, the Capital gains would make this optionprohibitive.
Thanks.
MM
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Hi

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

If you sell more than 18 months after a property has ceased to be your main residence -

Then

The gain is calculated on the sale price, less the purchase price, which forms the initial gain.

From this initial gain, then deductions can be made, such as the costs to buy and sell (such as legal fees and estate agent fees) and the costs of any capital improvements (such as new bathroom, roof etc)

The amount left over, is then considered for tax reliefs, and you would be due private residence relief for the 31 years that you lived here (so if you owned this property for 34 years, then 31/34 of any gain would be exempt due to the private residence relief due) but you also will be entitled to private lettings relief, due to the fact that this property, has been your main residence, and you have let it out to tenants.

Private lettings relief allows up to a maximum of £40,000 exemption (its the lesser of a) the amount of gain on which private residence relief has been awarded b) the amount of gain left over after private residence relief has been applied OR c) £40,000

Then you also have the first £11,000 exempt (this is the annual exemption allowance, so this is due x 2 if the property is in joint names) so you can see the gain position left over may be quite low!

But the other consideration is this, as you are due to leave the UK, if you plan to spend more than 5 years out of the UK, during which you are treated as not resident (which means visits back to the UK are less than 91 days each tax year) then as long as you sell before any plan return to the UK, then you are exempt from capital gains due to non residency!!

If you plan to spend less than 5 years out of the UK, or none of the years qualify as not resident, then the gain will be declared but the deductions and reliefs advised, can be claimed.

Finally note that any gain must be declared to the tax department in your country of residence (whether this has UK tax implications or not) and finally - that as you are due to live abroad, that rental income will need to have tax deducted from it, by either the managing agent if you plan to have one, or the tenant , unless you register for the non resident landlord scheme - link here regarding this application (which allows you to have your rents paid without deduction of tax)

http://www.hmrc.gov.uk/international/nr-landlords.htm

Either way you will need to complete a self assessment tax return each year - to declare the rental income along with any tax deducted, from which you will have personal allowances awarded against this, and any other UK income.

Let me know if you wish any clarification on any of the advise given,

Thanks

Sam

Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Sam,

Thank you for the prompt response and the complete reply.

I have read that CGT for non residents will be legislated for in the next budget. Is this something that you are aware of?

With Regards,

MM

Expert:  Sam replied 2 years ago.

Hi Michael

Thanks for your response

here have already been changes to theCGT position - but this applies to those that

1) buy property in the UK from abroad (so have never lived in the UK)

2) the property is worth more than £

3) The last 18 months only be due private lettings relief, rather than the last 3 years

As for the future, there is noise that might see capital gains arising on all sales, even on those properties that sees the owners not resident for more than 5 years, however in your case, you have had this property for such a long time, during which it WAS your main residence, that unless there is a super growth in the value - then I do not envisage you having a large capital gain tax position.

I would advise you to come back to Just Answer (and if you would prefer you can always ask for me Sam tax - then the other experts will respect the request and leave me to answer it) either when

1) You are thinking of selling or

2) due to return to the UK

Then you can get the up to date position at that time, and make a tax efficient decision.

Let me know if you have any further questions, but in the meantime, it would be appreciated, if you would rate/accept the response, as this ensures I am credited for my time.

Thanks

Sam

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