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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15917
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a property which I lived in as my PPR until 2012. I've rented it out si

Customer Question

Hi,
I have a property which I lived in as my PPR until 2012. I've rented it out since then. If I moved back into it before I sell, would that reduce my CGT. How long would I gave to live in it. I've owned it since 2002.
Tks, Kate
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Leave this with me while I draft my answer.
Expert:  TonyTax replied 1 year ago.
Hi again.
You should take a look at HS283 at the link below for information on the main residence and CGT, in particular Example 9:
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
You would need to move back into the property for longer than 18 months to make it worth your while because you are given the last 18 months of ownership of a property which has been your main home in any event.
That part of any gain you make which is covered by your occupation of the property will be exempt from CGT as will the gain for a maximum of the last 18 months of ownership of it when you were not living in it.
As the property has been let as well as having been your main home, you will be entitled to a further deduction from the gain called letting relief which will be a maximum of:
1 £40,000,
2 the sum of the gains for the period you lived in the property and for a maximum of the last 18 months of ownership of the property and
3 the gain for that part of the letting period less any part of that period covered by the last 18 months of ownership.
I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Hi, thanks. I think it won't help to move back, but I'm interested in the letting relief. Does it mean that my CGT liability will be reduced by a minimum of £40k ? Tks.
Expert:  TonyTax replied 1 year ago.
A maximum of £40,000, not a minimum. The actual amount will depend on the facts and figures of your case. The letting relief will the lesser of the three figures set out ast 1, 2 and 3 in my previous post, not the maximum.
Divide the potential gain by the number of months of ownership. Then, work out the gain for the period that you lived in the property (tax free), the gain for the last 18 months of ownership (tax free)and for that part of the letting period not covered by the last 18 months of ownership (not tax free). The letting relief will be as I set out in my answer. I would have thought that your letting relief will cover the "not tax free" gain.
Customer: replied 1 year ago.
Thanks Tony, just one more question. When I'm working out the gain per month, do I just take the total gain and divide by the number of months ? So no attempt to try and work out the actual increase by year ( some years would be negative). And how do I report the gain and pay the tax ? Is it just by my Self Assessment in the year if disposal. And I do all the calculation ? Tks.
Expert:  TonyTax replied 1 year ago.
The gain is treated as having accrued evenly over the whole period of ownership so that should make it easy. The value of the property when it was let is irrelevant.
You will need to report the disposal in your tax return for the tax year of disposal. See the CG pages here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/420000/sa108-2015.pdf
If and when you sell it, I can check your figures and tell you what to put into each box if you wish. HMRC will need to see a calculation but if you use the HMRC tax return software, you can use their proforma sheet to make it simpler.
When computing the gain, you can take account of legal fees for the purchase and sale, survey fees, stamp duty, selling agent fees etc to reduce the gain.
Customer: replied 1 year ago.
Great. Thanks. I will come back to you when I sell. Will probably be next year. I just checked out Example 9 in the fact sheet. Am I right to think that the tax liability in this example is coming from the vacant period before the sale ? If there was no vacant period and the tax due for the rented period is less than £40k, then there's no tax ? ( so long as the tax for the period of residency is more than £40k, mine will be). Tks again.
Expert:  TonyTax replied 1 year ago.
Any vacant period is a taxable period unless it is part of the last 18 months of ownership. Example 9 is good but you might click on the link for some other examples.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Great. Thanks very much. Good fast advice. Much appreciated. Well worth the fee. Thanks again. Kate
Expert:  TonyTax replied 1 year ago.
Thanks.

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