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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4089
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Re-capital gains on house sale in the UK. I have a house

Customer Question

Re-capital gains on house sale in the UK.
I have a house which I've decided to sell and get something bigger, I purchased the property in 2011 have come to put it on the market and discovered I would likely get stung for capital gains.
I paid £170k, it has now been valued at £215k
I have never lived in the property, and rented it out to friends on a gentleman's agreement they did pay a small amount of rent but not market value.
Currently live at home with my parents but the property remains empty but my only property.
Is there any way in which capital gains could be reduced other than living in the property for a period of time?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, and pleased to be able to help you with your problem. As you never occupied the house it is likely that you would not be entitled to Private Residence Relief (PRR). Now PRR is given against your sole or main domestic residence, note the word 'sole.' HMRC delight in reading the word as 'and' not 'or' which I am sure you will agree puts an entirely different complexion on the matter. I suspect that you are in for a battle here and would be well advised to engage a trusted, local practitioner to hold the ring for you on disposal. Were Capital Gains Tax (CGT) to apply then the gain would be 45K, but purchase costs including stamp duty and any improvements not to mention selling costs are all deductible. You are not entitled to Lettings Relief as you never occupied, but you do have an Annual Exempt Amount of 11.1K which reduces your gain to say 34K. This will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. Worst case scenario is a tax bill of about 9.5K quid. I am so sorry to have to rain on your parade.
Customer: replied 2 years ago.

What about costs when buying the new house? Are they deductible?

Expert:  bigduckontax replied 2 years ago.
They would be when it is ultimately sold assuming that PRR is not available. They are not deductible on purchase.
Customer: replied 2 years ago.

How about outstanding loan? Is anything deductible there?

Expert:  bigduckontax replied 2 years ago.
The interest element on the loan is allowable against any rental income. It does not come into the CGT computation.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.