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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have two properties one (main residence ) lived in for

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Hi I have two properties one (main residence ) lived in for 23 years, second my dad died 3 years ago leaving me a small cottage,I have moved in to the second one whilst I renovate my main one think it will take me about 4 years as I have just had a bereavement which stopped any work for 12 months and working only at weekends moving back soon as finished and going to rent cottage hopefully but in years to come if I sell main residence will I have to pay tax on sale I know I will on cottage but someone told me if I move out for 4 years I will also have to pay on main residence if that's case I will have to employ people and move back in could you please put me straight kind regards ***** ***** if there is a time limit am I better moving back in whilst I carry on working as it is liveable but it will just be dusty.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.Take a look at HS283 here for information on the main residence and CGT.When you sell a property, the gain is treated as having accrued evenly over the entire period of ownership so computing the tax free part and the taxable part is fairly easy. You won't know the situation as far as CGT is concerned until you decide to sell the property that you have lived in for 23 years and it will depend on the facts and figures and tax law at the time. Under the current rules, the gain for the period that a property is your main home will be exempt from CGT as will the gain for the last 18 months of ownership when you may not be living in it. Even if you sold up when you have finished the renovation, of 27 years of ownership the gain for 24.5 years (23 + 1.5) will be exempt from CGT. That would leave the gain for 2.5 years exposed to CGT. The first £11,100 of gains an individual makes in the current tax year will be exempt from CGT and that exemption is only likely to increase in the future, though there are no guarantees. I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.

Sorry confused at those figures roughly if I bought in 1989 for 50000 and sold when finished for 300000 what amount roughly would I pay capital gains at today's tax

Expert:  TonyTax replied 1 year ago.
If any of the "renovation" costs are really improvement costs as opposed to general repairs, then they could reduce your gain whcih in turn will reduce the CGT.

If you made a gain of £250,000 after 27 years of ownership, you would get main residence relief for £226,852 (£250,000 / 27 years x 24.5 years). That would leave £23,148 (£250,000 / 27 years x 2.5 years). The first £11,100 of that would be exempt leaving you with a net taxable gain of £12,048 (£23,148 - £11,100).

There are two rates of CGT, 18% and 28%. The rate or combination of rates that you would pay would be determined by the level of your income in the tax year you sold the house. The CGT could be as low as £2,168.64 (18%) or as high as £3,373.44 (28%).
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15753
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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