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Sam
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Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I currently own a property (main residence) that i bought in

Resolved Question:

I currently own a property (main residence) that i bought in July 2012. Since then the property has increased in value (£335K to c £560k at present)
I'm in the process of buying an additional property with the intention of renting out my current one.
My concern is that if I later decide to sell the rental property i will be hit with capital gains tax on the whole increase in value of the property even though the bulk of that increase occurred when it was my main residence.
I will be remortgaging the property at the time of transfer to rental so will have a professional valuation.
If i decide to sell the rental property at a later date how will the gain be taxed, will it just be any gain over this valuation, or will it be on the whole increase?
Is there a way round this?
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi
Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
The gain (when a property is sold) is treated as having accrued over the whole period of ownership, so I am afraid when you come to sell, its the purchase value that is deducted from the sale value, which forms the initial gain.
Then deductions are made for the costs to buy and sell 9such as legal fees, stamp duty and estate agent fees) and any capital improvements to the property (such as new kitchen etc - so do keep those receipts safe)
Then reliefs are considered, and in your case the time you lived there which would be from July 2012 to the date you out plus the last 18 months of ownership, and there is also private lettings relief which can allow up to a maximum of a further £40,000 relief.
So if you sold the property within 18 months of moving out, then there would be no capital gains to pay, only if you sell beyond his 18 month timeline does a gain (along with the deductions and reliefs advised on) need to be considered.
Let me know if you have any follow on questions
Thanks
Sam
Customer: replied 3 years ago.

Thanks Sam, very useful and clear. To clarify completely though:

If i sell having let the property for less than 18 months after i move out - no capital gains tax is due.

If i sell after (say 2 years) I would get 2.5 years worth tax free (july 2012 - Jan 2015) and 2 years taxed based on the whole increase split between these.

Or would i get the 18 months you mentioned as well? so just 6 months would be taxable?

Expert:  Sam replied 3 years ago.
Hi George
Thanks for your response
Yes if you sell within 18 months of moving out, then there is NO capital gains.
If you sell 2 years after moving out, you still get the last 18 months of ownership 9along with the time you lived there) and also then get private lettings relief considered for the remaining 6 months. So even after a 2 year absence, and then sale, may still have no tax arising.
Plus the current annual exemption allowance is £11,000 (so after all the deductions are reliefs, you still have the first £11,000 of any remaining gain exempt)
Thanks
Sam
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