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I had a property which I let out as I moved in with my ex partner.

Resolved Question:

I had a property which I let out as I moved in with my ex partner. We split and I bought another house in 2011. I am planning on moving back in to the original house in 2 years. Will I pay capital gains? If so, how long will I have to live in my original house to avoid paying capital gains before moving on?
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.
Can you advise
1) The date the property was bought
2) The date you move out to live with your ex partner
3) Confirm that rental income was declared to HMRC (as additional tax reliefs wiping out some of the capital gains might be due)
4) The date you bought the new property and what is to be done with this new property when you move back to your original purchase
Thanks
Sam
Customer: replied 2 years ago.
It was bought in May 2008
I moved out in 2010
I haven't declared it
I bought my new property in November 2011.
Thank you
Expert:  Sam replied 2 years ago.
Hi
Thanks for your response and the additional information
I am afraid there is no avoiding capital gains, although you are due some reduction on any gain for the time you lived there plus the last 18 months of ownership.
So once the gain has been established (the sale price less the purchase price) then from this can be deducted the costs to buy and sell (so legal and estate agent fees, stamp duty etc)
Then tax reliefs to further reduce the gain are considered
So to date you have owned this property for just over 6 years, of which you lived there for approx. 2 years, so this 2 years plus the last 18 months, will form an exemption so in essence 3.5/6 of any gain made. But as you can see if you hold onto this property for a further 2 years and then move in for any period of time, the length of ownership increases, but the time when this was not your main residence (from 2010 to whenever you move back in) will always remain, thereby always creating a capital gain consideration.
If you had declared the rental income (which I do urge you to rectify with HMRC) then you get a further tax relief called private lettings relief, which allows up to a maximum of a further £40,000 exemption on the gain. So although you may never actually wipe out the gain, the tax reliefs due may well cover the entire gain.
Also just so you have the full picture, any gain made in any tax year, sees the first £11,000 as exempt - as this is the current annual exemption allowance.
But, the bot***** *****ne is moving back in will not change the capital gain position that has already been established for the absence from the property.
Let me know if you have any follow up questions on the information I have provided. If,not, then it would be appreciated, if you would rate/accept the answer, as this will ensure Just Answer credit me for my time.
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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