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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am looking to sell my house as I live in a school with my

Customer Question

I am looking to sell my house as I live in a school with my work. I have £130000 of equity in my property. If I do not buy another property immediately will I have to pay capital gains on this amount? What are my options?
Submitted: 4 months ago.
Category: Tax
Expert:  bigduckontax replied 4 months ago.

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

Before I can fully address your inquiry I need to know a number of additional facts. Did you ever occupy this house as your sole or main domestic residence, when did you buy it and what did you pay for it? When did you enter job related accommodation at your work place?

Customer: replied 4 months ago.
Thanks for getting back to me Keith. I purchased the house in 2005 as my primary residence but have lived in with my job and have not lived in the property. I am looking to buy a new house closer to my work so that I can live in it. Do I need to transfer the cash straight into my new house upon sale, within the same tax year or does it not matter and I will have to pay tax? I have repaid the mortgage through a repayment mortgage for the past 11 years and have £75000 left to pay on the mortgage. Please advise on my options.
Customer: replied 4 months ago.
The Sale price for the house is £215000.
Customer: replied 4 months ago.
Over the years I have spent a considerable amount on the property with new windows throughout, new bathroom, kitchen, conservatory and need all the money that I can to put into a property to live in. I am keen to know what my options are to protect my deposit.
Customer: replied 4 months ago.
I have lived in my work place since 2000.
Expert:  bigduckontax replied 4 months ago.

Occupation of Job related accommodation extends Private Residence Relief (PRR) for the entire period it is so occupied. Here is the guidance from HMRC Helpsheet 283 [edited]:

'If you live in accommodation that is job-related and you also own a dwelling house that you intend to occupy as your only or main residence, the dwelling house you intend to occupy is treated as actually being occupied by you as a residence during the period in which you intend to occupy it, even if you never actually live there. This means that you may nominate that residence as your only or main residence and get relief on the whole or a part of the gain. If your intention to live in the dwelling house ends, then the dwelling house is no longer treated as your residence.'

The general consensus of experts on this site is that you should occupy this house for at least 6 months before sale to cover the last sentence in the Helpsheet opinion. However, for your last 18 months of ownership you are deemed to be in occupation even if this is not the case. You should, if you plan carefully, have no Capital Gains Tax (CGT) to pay as PRR relieves it at 100%. For your information the gain is calculated on the difference between the net selling price and the acquisition cost. The former is the sale price less the cost of sale. The acquisition price is the price paid plus purchase costs including Stamp Duty plus improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance. The gain so calculated is reduced by your Annual Exempt Amount (AEA) of 11.1K and then 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.

I do hope that you have found my reply of assistance. Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 4 months ago.
Thank you for your considered response.
Expert:  bigduckontax replied 4 months ago.

Delighted to have been of assistance.

Please do not forget my rating.

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