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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4348
Experience:  FCCA FCMA CGMA ACIS
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I HAVE OWNED A PROPERTY SINCE NOVEMBER 2012. I LET IT OUT A

Customer Question

I HAVE OWNED A PROPERTY SINCE NOVEMBER 2012. I LET IT OUT A COUPLE OF MONTHS AFTER BUYING IT UNTIL APRIL THIS YEAR 2015. I AM NOW LIVING IN IT FOR 5 MONTHS BUT IT IS TOO FAR AWAY FROM WORK AND I WOULD LIKE TO SELL IT.
IF I SELL IT NOW HOW MUCH CAPITAL GAINS TAX WOULD I BE LIABLE FOR OR WOULD IT BE BETTER FINANCIALLY FOR ME TO WAIT A CERTAIN LENGTH OF TIME BEFORE I SELL SO AS I WOULD BE LIABLE FOR LESS TAX?
I BOUGHT THE PROPERTY FOR 245,00 AND VALUATION NOW IS 400,000.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Unfortunately, as you did not live in the house before you first rented it out you are not entitled to Lettings Allowance which is available up to 40K. You have a possible gain of 400K - 245K = 155K. However, only a proportion of that gain will be liable to Capital Gains Tax (CGT). Your total ownership is 29 months and you occupied for 18 months [for the last 18 months of ownership you are deemed to be in occupation even if this is not the case. Thus only 18 / 29 = 62% of the gain will be subject to CGT (say 96K). Deduct your Annual exempt Amount of 11.1K leaves say 85K gain which is taxable at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale; worst case scenario a bill of some 24K. There is a possible danger that HMRC will claim that you are trading in land and try to apply the gain to income tax; however, in the circumstances you refer to in your question I do nit thing that Department would be successful going down that particular road. I do hope my reply has been of some assistance.
Customer: replied 2 years ago.

Thank you very much. May I clarify that henceforth my selling now as opposed t selling later eg after living there for a full year will make no charge to my tax bill?

Expert:  bigduckontax replied 2 years ago.
It will reduce it slightly. The longer you live in it once the last 18 months rule period is passed then the ratio of gain chargeable to CGT will fall and hence the exposure to CGT.
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