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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I own a buy to let property and would like to sell however

Customer Question

Hi
I own a buy to let property and would like to sell however will I pay loads in Capital gains tax?
I've owned the property 15 years ( ex marital home) bought ex wife out and turned into buy to let mortgage 4 years ago,rented through a managing agent
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

On the assumption that you resided in the property as your sole or main domestic residence until you rented it out four years ago the Capital Gains Tax (CGT) will not be nearly as bad as you feared. You will be entitled to Private Residence Relief (PRR) for the period up to the point of letting and you are deemed to be in residence for the last 18 months of ownership even if this is not the case. The computation is actually worked out in months.

Your total ownership time is 15 years. Your letting time is 2.5 years. Thus 2.5 / 15 [say 16.7%] of any gain will be exposed to CGT. From this you can deduct 11.1K of non cumulative Annual Exempt Amount (AEA) and also Lettings Relief (LR) up to 40K. The remaining sum is taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale.

The gain is computed as follows. It is the difference between the acquisition and the disposal price. The former is the purchase price plus purchase costs including Stamp Duty plus enhancements eg installation of double glazing, central heating, extensions etc, but not routine maintenance although that element can be charged against rental income during the letting period for Income Tax (IT) purposes. The disposal price is net after deduction of selling costs including advertising.

I do hope that you have found my reply of some assistance.