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Hi Since 2006, I have been living with my partner. I bought

Customer Question

Hi
Since 2006, I have been living with my partner. I bought my own home in1988 and from Nov 2006 until July 2011 the property was rented out, since then my son has been living in my house. I would like an idea as to the CGT implicatiions and any advice or guidance you could give me as to mitigate my tax obligations.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

You will be liable to CGT on disposal, but not for all the gain you make. The calculate the gain you take the net selling price, the work out the purchase price plus costs and add the costs of any improvements eg installation of double glazing, installation of central heating, extensions etc but not routine maintenance. The latter costs can be set against rental received if incurred during the rental period. Take one figure from the other. Having calculated the gain you then adjust it for CGT.

To do this you take the the rental period in months less 18 [for the last 18 you are deemed in residence even if you are not] and the total ownership period in months. The amount for CGT is the gain multiplied by a factor of the adjusted rent period divided by total ownership period. From this can be deducted Lettings Relief which is available up to 40K. The resultant figure is the sum liable to tax at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale.

I am sure that you appreciate that without full data I cannot estimate possible liability, but you will see that the smaller the adjusting fraction the lower the exposure to CGT. If you sold now the factor might be of the order of 56/216 = say 26%. The gain would be adjusted by that factor less Lettings Relief.

I do hope I have shown you the way forward in this matter and given you some guidance.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3379
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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