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TonyTax
TonyTax, Tax Consultant
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I am considering selling my rented property. I purchased this

Resolved Question:

I am considering selling my rented property. I purchased this in 2006 for £165,000. I lived in it till April 2012, since when I rented it out.
I now wish to live in it, and then possibly sell it in the future.
My first question is how long would I need to live in the property for it to be considered my main residence again - and therefore not being liable to pay capital gains tax?
The second question is if I sold the property now, for a price of £265,000, how much capital gains tax would I be liable for? the estate agents fees would be around 2.5% + vat for the sale
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Let me take a look at this and I'll get back to you.
Expert:  TonyTax replied 1 year ago.
Can you tell me which month in 2006 you bought the property please.
Customer: replied 1 year ago.

Hello,

Yes completion was 13th September 2006

regards

Expert:  TonyTax replied 1 year ago.
Hi again.

You should refer to HS283 as part of this answer.

A property becomes your main home when you move into it unless you make an election for another one to be treated as your main home. That doesn't necessarily mean the past when it was not your main home is forgotten and there is not a CGT liability. It depends on the facts and figures.

If you sell the property in December 2015 for £257,000 (net of selling fees but you can also claim legal fees of purchase and sale, survey fees, stamp duty) you will make a gain of £92,000. By then, you will have owned it for 112 months of which you will have lived in it for 68 and let it for 44.

Ther figures are as follows:

Exempt gain £70,643 (£92,000 / 112 months x 86 months (68 + 18))

Non exempt gain £21,357 (£92,000 / 112 months x 26 months (44 - 18))

Letting relief £21,357 (lesser of £40,000, £70,643 and £21,357)

Taxable gain £0

I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.

Hi Tony

many thanks for this, please can I just check the calculations:

a) £92,000 multiplied by 0.76 = £70,643. This is exempt gain for the 86 months that I lived at the property. I understand where the 68 months comes from to calculate the 86 - but where does the 18 months come from? Is this an automatic statutory allowance?

b) is the letting relief correct? for example, could this potentially be as high as £70,643? How is the £40,000 figure derived - is this an automatic statutory allowance?

c) where does the capital gains tax allowance of £11,00 feature in the calculation?

Expert:  TonyTax replied 1 year ago.

£92,000 multiplied by 0.76 = £70,643. This is exempt gain for the 86 months that I lived at the property. I understand where the 68 months comes from to calculate the 86 - but where does the 18 months come from? Is this an automatic statutory allowance?

Look at HS283. When a property has been your main home, the last 18 months of ownership is given as a tax free period even if the property was let or vacant during that period.

b) is the letting relief correct? for example, could this potentially be as high as £70,643? How is the £40,000 figure derived - is this an automatic statutory allowance?

Look at HS283. It cannot be more than £40,000 per part owner of a property.

c) where does the capital gains tax allowance of £11,00 feature in the calculation?

It doesn't. You have no taxable gain based on the facts and figures as they stand.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15883
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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