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Sam, Accountant
Category: Tax
Satisfied Customers: 14195
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Ive rented out my home (I am the sole owner) since May 2011

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I've rented out my home (I am the sole owner) since May 2011 and lived in 2 other (rental) properties during this time due to my job. I am considering moving back into my property at the end of April 2014 with a view to living in it for a while before selling.
My question is what my CGT liability when I eventually sell if:

1. I move back into my property by May 2014, or
2. I keep renting the property out and move back in at some point in the future before selling, or
3. I keep renting the property out and sell without ever moving back in, or
4. I move back into my property and rent part of it while I'm also living there?


Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.

Could you advise what job required you to live away from this property - was it due to the duties you performed, which required you to live on site OR whether it was due to geographical reasons - and whether an employer required you to move location, or whether you chose to seek employment elsewhere.

And what circumstances are to change that might allow you to move back into the property - and under what circumstances you might not move back in -

This will enable me to fine tune the answers you seek, as many of them depend on what is or isn't possible, and what may or may not be - and most importantly - why



Customer: replied 4 years ago.



I didn't move country but rather moved to a different UK city in May 2011 as I received a job offer there and the commute would have been too long from my property in London. I was not required to live on site and nor did my employer require me to move to that location. I was a student (and carer for my mother) for 1.5 years prior to the job offer.


(To give a bit more background, the property was an inheritance from my mother who passed away in 2010. The property was transferred into my sole name that year - I think March/April. I decided that if I had to move away for work reasons, I would rent the property out for extra income.)


So in May 2011 I moved to a different city and rented a flat there until end of March 2013. I then moved jobs and returned to London but chose to move into rented accommodation close to work to be close to my partner. Essentially, I could have lived in my property but I decided not to due to the long commute (my property is 1.5 hours+ one way from my current job), opting instead to continue to rent it out.


I am considering buying a property jointly with my partner in the next year or two. In order to do so, I am considering selling my existing property to free up capital. Therefore, if I can reduce my CGT liability by moving back into the property (and ceasing to rent it out), then I will do. If the CGT liability does not differ that much should I decide to continue to rent my property, then I would be inclined not to move back.


I have also heard of Lettings Relief but I'm not too sure if that applies to my situation.


I hope this makes sense.


Many thanks. Tasha



Hi Tasha

Thanks for the response and the additional information

Can I just clarify that from the time you inherited this property and the time that you moved away for work purposes, that this was your main residence (that you lived there)
If so, then there will be little or no capital gains to pay - as you will be exempt for the time that you lived there - and for the last 36 months of ownership (although this is set to change from 36 months to 28 months after 05/04/2014)
But you can have 3 years absence (for any reason) from the property but in your case to benefit from this it would be essential that you moved back into the property - as you chose to work away rather than was transferred through existing employment. And if you did not move back into the property then this period of time from may 2011 to May 2014 - would not be granted under the private residence relief exemption.
But either way you would benefit from lettings relief, which allows a further exemption on
1) The amount of capital gain on which private residence relief is due
2) The amount of gain after private residence relief has been applied OR
3) £40,000

Private lettings relief, also works on the proviso that you declared all rental income to HMRC.

So at the least you have the time you lived there - exempt, the last 18 months (as I imagine you would not sell before 05/04/2014) exempt, and up to £40,000 further exemption.

The capital gain is the sale price, less the value at the time you inherited it, This forms the initial gain,. from this initial gain you can first deduct the costs to sell (so legal fees and estate agent fees and HIPS etc) and the costs for any major improvements, such as new kitchen, new bathroom etc.
The gain left over, then has private residence relief and private lettings relief applies, then the amount left over, filly has your annual exemption allowance deducted form it.

The annual exemption allowance is currently £10,900 and due to rise to £11,100 from 06/04/2014.

Then any final figure left over is subject to capital gains - either 18%, 28% or a mix of the two (if you earn less than £42,475 a year - then any unused basic rate band forms that amount of gain to be just liable to 18% and any remaining gain at 28%)



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