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TonyTax
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WE HAVE JUST SOLD OUR SOLE PROPERTY WHICH HAS BEEN RENTED OUT

Resolved Question:

WE HAVE JUST SOLD OUR SOLE PROPERTY WHICH HAS BEEN RENTED OUT FOR 20 YEARS
WE LIVED IN IT FOR AROUND 5 YEARS PRIOR TO RENTING IT WE NOW HAVE BROUGHT A
NEW HOUSE AND HAVE RENTED IT BACK OUT AND WE WILL BE LIVING IN THIS NEW HOUSE WHEN WE RETIRE WILL WE HAVE TO PAY CAPITAL GAINS TAX
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Take a look at HS283 for information on the main residence and CGT. You could make an election within two years of having acquired the second property for one of the two to be treated as your main home for CGT purposes but the letting has put paid to that at least for the time being as an election is only effective while you have more than one residence available to you to live in.

If you sold the property you are letting now, you would get exemption from CGT for about 6.5 years worth of the gain out of 25 years, about 26%, under the main residence rules. In addition, as the property has been let as well as having been your main home, each part owner will be entitled to letting relief to reduce the otherwise taxable gain and this would be the lesser of:

1 £40,000,

2 the sum of the gain covered by the period you lived in the property and the gain for the last 18 months of ownership (this is given to you free so you don't have to be living in the property in that period) and

3 that part of the gain not covered by the last 18 months of ownership.

The first £11,100 of gains an individual makes in any one tax year are exempt from CGT.

Tax rules can and do change over time so reliefs that apply now may not do so in the future.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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