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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4882
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I have 2 houses which I wish to sell (I live in another).

Resolved Question:

I have 2 houses which I wish to sell (I live in another). I have been renting the 2 houses but I did live in both at one time or another. I have sold one and worked out how many years I lived there compared to the gain then less private letting relief of £40k and am ok on tax. However, if I sell the other house before April I'm concerned that I don't get a second £40k private letting relief in the same year - is that true?
Also, I made a loss on a house sold last year and wondered if this can be taken off the exposure (how long is this allowed to be counted after the loss)?
Long question sorry
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Please clarify for me

You say you have lived in both houses at some point as your main residence.
How long did you live in those houses and did you notify HMRC as to which property is your main residence within two years to acquiring the second home.

Would you have documentary evidence to support your claim for private residence claim on those houses?

The loss on sale of property last year, did you report the loss on your last year's tax return?

Many thanks
Customer: replied 2 years ago.

I lived in both houses as my main residence - one for 4 years and one for 2. I will have all utility / council tax proof of living there but I didn't notify anyone specifically as I didn't think of this situation ahead. As I have had rental houses for a long time I have an accountant that noted the £40k loss of another house the year before.

The table shows my hack tax calcs. House 1 is sold already and house 2 is going to be sold. I am trying to minimise tax so thought if private letting relief is only available once per year it might help to wait until after april to sell













































House 1House 2
Value when bought£177,500.00£80,000.00
Lived in how long + 18 mths5.53.5
number years owned1014
Selling price£240,000.00£180,000.00
Gain bought to sold£62,500.00£100,000.00
Tax Exposure£28,125.00£75,000.00
Private letting relief (£40k)-£11,875.00
Expert:  taxadvisor.uk replied 2 years ago.

Pete, thank you for your reply.

It would be helpful if you provide dates (for each property) as follows:

Date property bought

Period as main residence (dates)

Date property sold

I will revert to you with my calculations soon.

Many thanks

Expert:  taxadvisor.uk replied 2 years ago.
Pete, thank you for your patience.

If you are able to satisfy HMRC that both houses have been your main residence at different times during period of ownership, albeit you failed to notify HMRC in prescribed time frame, you would be able to claim letting relief. This relief is per property and not a set allowance for the year.

I have done calculations based on assumption you would be able to claim letting relief.
More information on private residence relief can be found here
http://www.hmrc.gov.uk/helpsheets/hs283.pdf

Secondly, capital losses are availble for offset against capital gains provided you have reported them on your tax return in the year of loss. More information of this can be found here

http://www.hmrc.gov.uk/cgt/intro/losses.htm#3

Sale proceeds - Investment property [A]
Period of ownership - months 120
Period as main residence - months 48
Private residence relief - months 66
As you would be living in the property upto date of
sale there is no additional relief to cover last 18 mths
of ownership (HS283 - example 4 on page 4)
Potential capital gain (240,000-177,500) £62,500
Gain covered by private residence relief
(66/120) x 62,500 £34,375
Gain subject to capital gains tax (62,500-34,375) £28,125
Letting relief - maximum £28,125
This is lower of
£40,000
Private residence relief
Gain on the part of the property that's been let
Net chargeable gain after letting relief £0
Sale proceeds - Investment property
Period of ownership - months 168
Period as main residence - months 24
Private residence relief - months 42
As you would be living in the property upto date of
sale there is no additional relief to cover last 18 mths
of ownership (HS283 - example 4 on page 4)
Potential capital gain (180,000-80,000) £100,000
Gain covered by private residence relief
(42/168) x100,000 £25,000
Gain subject to capital gains tax (100,000-25,000) £75,000
Letting relief - maximum £25,000
This is lower of
£40,000
Private residence relief
Gain on the part of the property that's been let
Net chargeable gain after letting relief £50,000
Annual gains allowance £11,000
Net chargeable gain after allowance £39,000


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 2 years ago.

Thanks. Just a couple of points:

I was not living in the properties when they are / were sold as you said. Does this make a difference? I did live in them but I have another house now that is seperate that I live in.

Also, the £39k chargeable gain would be covered by my previous loss but what would the tax be on that if not?

Thanks,

Expert:  taxadvisor.uk replied 2 years ago.
Pete, thank you for your reply.

You don't have to be living in the property at the time of sale to claim private residence relief.

In the event the whole £39k gain is chargeable, then your maximum CGT would be
(39,000 x 28%) £10,920.

CGT rates are 18%, 28% or a combination of both depending on your total income including the gain in the year of gain.

I hope this is helpful.
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4882
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.

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