1: February 2004 for £178,000
2: I have never lived there
3: It has been let on and off since I first bought it
4: I am intending to spend £100,000 on it and hope it will be worth around £500,000
Thanks.Leave this with me while I draft my answer. It will take a while.
Hi again.If you sell the property in February 2016 for £500,000, you will make a gain of £222,000 (£500,000 - £178,000 - £100,000). By that time you will have owned it for 145 months of which you will have lived in it for 14 months from January 2015 say, and it will have been let or available for let for 131 months to the end of 2014 say.Only the cost of actual improvements to the property can be added to the cost for CGT purposes and you will need to retain the receipts and invoices for that expenditure. The costs of general repairs and maintenance and other expenses you would normally deduct from rental income or incur as an owner occupier cannot be claimed.The gain for the period the property is your main home will be exempt from CGT. You will also get an additional 4 months worth of gain as exempt as the gain for the last 18 months of ownership of a property which has been your main home is given as tax free even if you were not living there. That accounts for £27,559 (£222,000 / 145 x 18). The remaining taxable gain of £194,441 will be that part of the letting period gain which will not be covered by the last 18 months of ownership (£222,000 / 145 x 127).As the property will have been both your main home and let you will be entitled to letting relief which will be the lesser of:1 £40,000,2 the sum of the main residence gain and the gain for the last 18 months of ownership of the property which will be £27,559 and3 the letting period gain which will be £194,441.Letting relief of £27,559 will reduce the remaining gain from £194,441 to £166,882 and the annual CGT exemption for 2015/16 of £11,100 will reduce it further to leave you with a net taxable gain of £155,782.There are two rates of CGT, 18% and 28%. The rate or combination of rates you will pay will be dependent on the level of your income in the tax year of disposal of the property. Assuming you sell the property in the 2015/16 tax year, one of the following will apply:1 If your income in 2015/16 including the taxable gain is £42,285 or less, then all the taxable gain will be taxed at 18%.2 If your income in 2015/16 excluding the taxable gain is more than £42,285, then all the taxable gain will be taxed at 28%.3 If your income in 2015,/61 excluding the taxable gain is less than £42,285 but more than £42,285 when you include the taxable gain then part of it will be taxed at 18% and part at 28%.I hope this helps but let me know if you have any further questions.
So, my net taxable gain will be £155,782. If my annual income is 8,500 then I will pay tax on the total of these two amounts?
How do I prove I lived in the house or how to HMRC prove that I didn't? I have paid council tax the entire time...
Sorry - I promise this will be my last question! What I meant to ask is how to HMRC prove that I wasn't living their in the past - do they check credit reports etc.? 40k is a lot to lose!