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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4973
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I moved to Australia 8 years ago and have been renting out

Resolved Question:

I moved to Australia 8 years ago and have been renting out my house in the uk all that time. If I sell the uk house do I have to pay capital gains tax on it, if I do how long would I need to be back living in it to avoid the tax?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.

Hello and welcome to the site. Thank you for your question.

There are changes affecting CGT for non-resident property owners coming into force on 6 Apr 2015.

Previously, taking into account your personal circumstances i.e moved to Australia 8 years ago) you would have avoided CGT provided you sold your property whilst being a non-resident in UK for tax purposes. This is changing and from tax year 2015-16, the valuation of property at 5 Apr 2015 would be the base price and any gain over and above that would be chargeable to CGT. You would still be entitled to your gains allowance against this gain and the rest would be taxed.

If you were to come back and make this property your main residence again before selling it, then all period the property was your main residence would be covered by principal private residence relief. Additionally, you would get letting relief.

To give you a precise number of years required to avaid tax would mean carrying out what if exercise. I have given you an outline.

More information on private residence relief can be found here

http://www.hmrc.gov.uk/helpsheets/hs283.pdf

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk and 2 other Tax Specialists are ready to help you
Customer: replied 2 years ago.
I do not really understand the answer. I think you are saying if my house is worth say 300,000 April 2015 and I sell it in say two years time for 400,000 I would have to pay CGT on 100,000, is that correct? Are you able to give any approximation on how long I would need to live in it typically to avoid any CGT? Are we talking a couple of years or decades?
Expert:  taxadvisor.uk replied 2 years ago.
Thank you for your reply.

As not resident in the UK, if you were to sell your house before 6 Apr 2015, then the whole gain would escape CGT. This is being changed from 6 Apr 2015.

You say you are living in Australia and I presume you now own a property that is your main residence. As you can only have one property as main residenec at any one time, then the UK property is now a second home. On this basis the gain of £100k would be chargeable to CGT after gains allowance.

If you tell me when you bought the property and for how long you remained in it before moving to Australia, I will do some calculations for you.

Many thanks
Customer: replied 2 years ago.
We bought the uk property in August 1995 and moved to Australia in October 2007. Yes we have bought a property in Australia. Not sure if this is realivent but we pay uk tax on the rental income from our uk property, no monies relating to the uk house rental ever leaves the uk.
Customer: replied 2 years ago.
We bought our uk property in August 1995' moved Australia in October 2007. Yes we have bought a property in Australia. We pay uk tax on the rental income from our uk home.
Expert:  taxadvisor.uk replied 2 years ago.
Thank you for your reply.

CGT calculation - example

Period occupied as main residence
Aug '95 to Oct '07 and Apr '16 to Mar '17
move out and sell within 18 months of moving out
Total period covered by private residence relief =177 months

Period let
Nov '07 to Mar '16 = 89 months

Total period of ownership (89+177) =266 month

Gain chargeable after private residence relief (89/266)=33.5%
Lets say overall gain is £300k

Taxable gain (300,000x33.5%) =100,500
If the property is jointly owned, then yu would be able to claim letting relief of £80k (maximum) and the rest is chargebale to CGT.

Now you claim gains allowance and it will cover the balance and therefore no CGT payable.

I hope this is helpful.

would you like to reconsider your rating please?

many thanks
taxadvisor.uk and 2 other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

best wishes.

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