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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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To whom it may concern,I would like to know if I should

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To whom it may concern,I would like to know if I should nominate the Flat 1 below as the main residence now or not?Flat 1: Purchase completed in Dec 2010 and I lived there until Nov 2014. Since Nov, 2015, my friend lives there but I still pay council tax and my main bank statements are posted there. My friend moved out end of Jan 2016 and utility bills have changed into my nameFlat 2: Purchased completed in Nov 2014 and moved in mid Nov 2014 and i have lived here until now.Scenario 1: I am selling Flat 1. Do I need to nominate it as main home before sold?Scenario 2: If the selling doesn't go smoothly, I might start letting it out from Apr 2016 and sell it later. Do I need to nominate it as my main home now? Until when I can exempt CGT?(agent suggested rental income of 415 per week)Best Regards
Josh
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
My friend lived there sin Nov 2014 (not 2015, it was a typo) and moved out in Jan 2016
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your question.You have up to Nov 2016 to nominate which property is your main residence for CGT purposes.Let's look at Flat 1 - .Main residence Dec 2010 to Nov 2014 - this period is covered by private residence relief.Last 18 months of ownership also qualify for additional relief. Therefore, the period to Apr 2016 is fully covered by private residence relief. If you sell the property in the near future, you are unlikely to pay CGT.In my view, you should nominate Flat 2 as your main residence from date of purchase and hopefully sell Flat 1 in the near future. I hope this is helpful and answers your question.If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.
Hi,Thanks. The value of flat 1 increased 350k but flat 2 only 150k so I am really confused that how to deal with this.
Could you clarify the following, please?
1. Do you mean even if I do not nominate Flat 1, I can still get private residence relief up to the point I started to own my second flat + 18 months additional relief?
2. From Nov 2014 to Jan 2016, even though I didn't live there, council tax has been in my name and my bank statements are also all been posted there. Does that mean if I nominate flat 1 as main residence, then I can get relief the whole period fro Dec 2010 to Apr 2016 + 18 months addition relief? (Nobody lives in flat 1 now and I have started paying utility bills which are all in my name from this month, I will let it out from Apr 2016)
3. If I let it out from April until I sell, I can get another letting relief, right?
4. It is unlikely I would sell flat 2 in the near future, so I can renominate flat 2 to be the main residence after I sell flat 1 maybe next year. By doing so, I can still get some relief when I sell flat 2 in the future, right?Best Regards
Josh
Expert:  taxadvisor.uk replied 1 year ago.
Could you clarify the following, please?1. Do you mean even if I do not nominate Flat 1, I can still get private residence relief up to the point I started to own my second flat + 18 months additional relief?Answer - true as it was your only and main residence at that time.2. From Nov 2014 to Jan 2016, even though I didn't live there, council tax has been in my name and my bank statements are also all been posted there. Does that mean if I nominate flat 1 as main residence, then I can get relief the whole period fro Dec 2010 to Apr 2016 + 18 months addition relief? (Nobody lives in flat 1 now and I have started paying utility bills which are all in my name from this month, I will let it out from Apr 2016)Answer - you had moved out of the property to another flat. If you choose not to nominate Flat 2 as your main residence then you would get private residence relief to Apr 2016 (as you wish to let from that date) plus final 18 months of ownership. 3. If I let it out from April until I sell, I can get another letting relief, right?Answer - yes and this is covered in HS283 herehttps://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet 4. It is unlikely I would sell flat 2 in the near future, so I can renominate flat 2 to be the main residence after I sell flat 1 maybe next year. By doing so, I can still get some relief when I sell flat 2 in the future, right?Answer - You would get some relief and not 100% relief. Flat 1 has given you better return. All gain to Apr 2016 is covered by private residence relief whether you nominate it as main residence beyond Nov 2014 or not. Furthermore, letting relief will reduce your gain chargeable to CGT (up to a maximum of £40k). I would try to maximise relief on Flat 2 from date of purchase and not just from date of sale of Flat 1. I hope this is helpful and answers your question.
Customer: replied 1 year ago.
Ok. I see. Just final question then I can rate your service.Is the following correct?I nominate flat 2 as main residence by Nov 2016.
I dont nominate flat 1.
By doing so, I only get private relief until Nov 2014 + 18 months additional relief so no capital gain tax until Apr 2016.
I start to let it out in Apr 2016. I get letting relief up to 40k until I sell the flat. So lets say if I sell in Nov 2017, it is 7 x 12= 84 months ownership with 20 months letting. so my chargeable CGT is 20 / 84 x profit but I will get up to 40k letting relief on this 20 / 84 x profitThen in the future when I sell flat 2, I won't have CGT because it is nominated
Expert:  taxadvisor.uk replied 1 year ago.
If you sell Flat 1 in Nov 2017CGT calculationsGain on sale £375,000Period of ownership - months 84Period as main residence - months 48Additional relief Final 18 - months 18Private residence relief - months 66(there is an additional relief to cover last 18 mthsof ownership (HS283 - example 9 )Potential capital gain £375,000Gain covered by private residence relief(66/84) x 375,000 £294,643Gain subject to capital gains tax 375,000-294,643 £80,357Letting relief - maximum £40,000This is lower of - £40,000 per owner £40,000 - Private residence relief £294,643 - Gain on the part of the property that's been let £128,511Net chargeable gain after letting relief £40,357Gains allowance - £11,100 per owner £11,100Gain chargeable to CGT £29,257CGT - maximum at 28% £8,192 Flat 2 - no CGT payable as covered by private residence relief.I hope this is helpful
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Customer: replied 1 year ago.
Thanks it is very clear but how do you get the result of Gain on the part of the property that's been let £128,511?
Expert:  taxadvisor.uk replied 1 year ago.
Sorry, that should read £63,137 (18/84x294,643). Many thanks
Customer: replied 1 year ago.
Perfect. Thank you. I can't appreciate more!
Expert:  taxadvisor.uk replied 1 year ago.
I thank you for accepting my answer.Best wishes

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