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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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I have a flat in London, bought in December 2009 for

Customer Question

Hello
I have a flat in London, bought in December 2009 for c.£400k, which is now valued at c.£800k = £400k gain. I moved out of this property into a house I had then purchased (April 2016) when I started a family. My partner and I are not married or in civil partnership yet. The flat has been rented out the past year.
I understand that the last 18 months are tax-free after moving home, but then capital gains start accruing thereafter. Given the 18 month period expires in October 2017, we now have the property on the market for sale - but would like to be sure whether we really need sell the property or not.
I have done some rough calculations, and if we were to continue renting and then sell the property in say December 2018 (1.2 years chargeable period, out of 9 total ownership at the time = 13% chargeable) then we'd be looking at nearly £15k CGT (as a high rate tax payer)! I am assuming here that property prices do not rise in the foreseeable future so won't be considering any future gain.
Clearly I want to avoid the CGT charge for hanging onto the property for a year or two longer if we choose to do that - it seems a crazy given the gain has already taken place so I really would be throwing money down the toilet.
Any thoughts welcome!
Many thanks
Submitted: 9 days ago.
Category: Tax
Expert:  taxadvisor.uk replied 9 days ago.

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Expert:  taxadvisor.uk replied 9 days ago.

Thank you for your question.

You are right is your understanding and thought process.

I doubt properties would keep increasing in value year on year over the next 2 years.

Having said that, if you were to hold on to the property until Dec 2018 and it is let, although you would have surpassed the period allowed for additional relief (final 18 months of ownership), there is a further relief available called letting relief and the maximum relief available is £40k.

Bear in mind there is gains annual allowance to be taken into account before you working out chargeable gain on which CGT is payable.

More information on private residence relief including letting relief can be found here

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2016

I hope this is helpful and answers your question.

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