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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15944
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have rented a property out for two years and then moved

Resolved Question:

I have rented a property out for two years and then moved into the property and am presently living there and have been for 1 year and 4 months.
I now wish to move into another property which I want to refurbish this includes an extension. If I now rented the property out where I am, I will probably have been in the property for about 1 year and 10 months as my main residence.
If I sold the property after renting it out for about two years, can you tell me if I would be liable for capital gains.
For example would capital gains be only from when I newly rented out the property or when I bought the property.
Kind regards
Steve
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 1 year ago.

Your question isn't entirely clear. You say that you initially let the property for 2 years (did the letting start as soon as you bought it) and that you have no been living in it for 1 year and 4 months but if you NOW let the property you will have been living in it for 1 year and 10 months. Which is it, 1 year and 4 months or 1 year and 10 months? Are you intending to let it for another 2 years before selling it?

TonyTax and other Tax Specialists are ready to help you
Expert:  TonyTax replied 1 year ago.

Take a look at HS283 for information on the main residence and CGT. In particular , Example 9 is relevant to you.

A gain doesn't arise until a property is sold or given away. The gain for the period that you lived in it will be exempt from CGT as will the gain for a maximum of the last 18 months if you weren't living there. You will also be entitled to letting relief of up to £40,000 for that part of the ownership period the property was let and which was not covered by the last 18 months of ownership.

The easiest way to calculate the taxable part of any gain is to divide it into months of ownership and then extract the tax free parts. You are then left with the taxable part of the gain.

I hope this helps but let me know if you have any further questions.

Expert:  TonyTax replied 1 year ago.

If you sold the property in November 2016 for £425,000 you would make a gain of £137,000 (£425,000 - £250,000 - £38,000), £68,500 for each of you and your wife. You can also deduct the costs of purchase and sale (legal fees, stamp duty, survey fees, selling agent fees). The following figures are for each of you:

Total period of ownership to November 2016: 47 months

Period of owner occupation: 20 months

Period of letting: 27 months

Exempt gain: £29,149 (£68,500 / 47 x 20)

Letting period gain: £39,351 (£68,500 / 47 x 27)

Gross Non-Exempt Gain: £39,351

Letting Relief: £29,149 (lesser of £40,000, £29,149 and £39,351)

Taxable Gain: £10,202

Annual CGT Exemption: £11,100

Net taxable gain £0

If you let the property until November 2018 from November 2016 and sold it for £425,000, by that time you will have owned it for 71 months of which you will have lived in it for 20 months and let it for 51 months. The following figures are for each of you:

Total period of ownership to November 2018: 71 months

Period of owner occupation: 20 months

Period of letting: 51 months

Exempt gain: £36,662 (£68,500 / 71 x 38 (20 + 18)

Letting period gain: £31,838 (£68,500 / 71 x 33 (51 -18)

Gross Non-Exempt Gain: £31,838

Letting Relief: £31,838 (lesser of £40,000, £36,662 and £31,838)

Taxable gain: £0

Annual CGT Exemption: £11,100

Net Taxable Gain: £0

CGT on residential property gains is chargeable @ 18% or 28% or a combination of the two rates depending on the level of your income in the tax year of disposal. Look here to see how to calculate your CGT rate.