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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I have owned a property in London since 1999, since when

Customer Question

Hi
I have owned a property in London since 1999, since when I have rented it out for extended periods while living elsewhere (in rental property). Am I right in assuming that if I were to sell it now, I would have to pay CGT, even though I do not own another property? If so, could I offset the sums I have spent on maintenance over the years?
Would I still have to pay CGT on disposal if I moved back in? If not, for how long would I have to have lived there before selling?
Many thanks
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Take a look at the HMRC helpsheet on the main residence and CGT here.

You will get an exemption from CGT for any part of your period of ownership of it when you were actually living in it and for a maximum of the last 18 months of ownership when you were not living in it (even if was let during that last 18 months). Up to 5 April 2013, it was the last 36 months of ownership.

You cannot offset the costs of routine maintenance and repairs against the gain as these should have been claimed against your rental income which is taxable. The costs of improvements to the property can be claimed against the gain, eg, extension, conservatory etc. The costs of buying and selling the property can also be claimed, eg legal fees, survey fees, stamp duty, selling agent fees etc.

If the property has been both your main home at some point as well as being let, you will be able to claim some letting relief as well as some main residence relief. See example 9 on page 7 of HS283. If you have never lived in the property, you won't qualify for any main residence relief or letting relief.

I hope this helps but let me know if you have any further questions.

Expert:  TonyTax replied 2 years ago.
A correction. The last 36 month relief was reduced to 18 months for disposals after 5 April 2014, not 5 April 2013.
Customer: replied 2 years ago.

Apologies - I should have reread the HMRC helpsheet before responding. I'm probably being a bit thick, but does that mean that if throughout the whole period of ownership the property has either been my main residence, or has been let as residential accommodation, there will be no chargeable gain, and, therefore, no CGT tax to pay?

Expert:  TonyTax replied 2 years ago.

No, it doesn't I'm afraid.

The maximum that letting relief can be is £40,000 per part owner of the property. If you made a gain over 15 years of ownership of £150,000 for example, that's £10,000 per year. (Divide the gain by months for a more accurate calculation). If you lived in the property for 5 years and let it for 10 years, you would get 6.5 years worth of the gain as main residence relief. That's £65,000 of tax free gain (£150,000 / 15 years x 6.5 years). Letting relief would be the lesser of:

1 £40,000,

2 the main residence exempt gain of £65,000 and

3 that part of the letting period gain not covered by the last 18 months of ownership which is £85,000 (£150,000 / 15 years x 8.5 years).

Letting relief would be £40,000. The net taxable gain would be £45,000 (£150,000 - £65,000 - £40,000). The annual CGT exemption of £11,000 would leave you with a gain on which you would pay CGT of £34,000.

TonyTax and 3 other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Aah - yes that makes sense. A better outcome than I had feared, nevertheless! Many thanks

Expert:  TonyTax replied 2 years ago.

Thanks for accepting my answer.

I hope the proforma calculation is clear enough to allow you to substitute your own figures with confidence.

I have to go out for about 20 minutes but I will be back to answer any follow up questions you may have on the same topic.

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