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Sam, Accountant
Category: Tax
Satisfied Customers: 14153
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I own 1 property on a buy to let mortgage and now have to move

Customer Question

I own 1 property on a buy to let mortgage and now have to move into it as my main home...if I sold it and rented another home for a year or so until I passed the knowledge exam and then re purchased with a normal mortgage in a new main home using all or some of the equity would I have to pay any capital gains tax and would I owe the buy to let mortgage people any share of it ? Thank you
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Before I can fully answer your question I need a little more information. How many properties do you own? Also was this buy to let house rented out or did you occupy it, if so for how long?
Customer: replied 3 years ago.
This is my only home...It has been rented but I now have to live in it full time and would like to see
Expert:  bigduckontax replied 3 years ago.
Because you rented it out at some time your Private Residence Relief, which would remove any capital gain from taxation, will be limited proportionately. However you would have Lettings Relief of 40K plus your annual allowance of 10K (14/15 tax year), the last 18 month's of ownership ignored, which would substantially reduce any exposure to Capital Gains Tax (CGT), indeed it might reduce it to nil. Without figures, of course, I can't give full chapter and verse.

That is the only application of CGT applicable in your scenario. Mortgages do not come into the picture at all. During the time the property was let the interest element of the mortgage repayments would be allowable against the rental to reduce exposure for Income Tax purposes.
Customer: replied 3 years ago.
Ok thank you, XXXXX XXXXX am in a good position because I rented it for a short while. if I had a buy to let mortgage but couldn't rent it and lived in it as my only home for a few years, would that have made a difference ?
Expert:  bigduckontax replied 3 years ago.
Not the slightest, there is no connection between CGT and mortgages. The longer you lived in the house compared with the total period of ownership reduces exposure to CGT proportionately. By the way there is a small error in my answer; line 2, delete 10K, insert 11K.
Customer: replied 3 years ago.
Ok...I will prob have about 35k equity having owned the property for 4 years and my only home so it looks like i won't pay any capital gains you agree
Expert:  bigduckontax replied 3 years ago.

I concur, the Lettings Relief alone will cover any capital gain.


Sorry to be so long responding, I was out at the theatre for some culture.

Expert:  Sam replied 3 years ago.



I hope you do not mind me interjecting - I am also one of the UK tax experts here on Just Answer -




As private lettings relief is the lesser of

1) the amount of gain exempted for private residence relief

2) the gain left over after private residence relief has been applied OR




You will need to stay in this property for some time - as even a year living here (with no increase in your gain) you would only be due approx £7000 private residence relief (1/5th of the gain to represent living here for 1 year out of 5) and the same for private lettings relief, so a total of £14,000 from the gain of £35,000 still leaves £21,000 - and even after £11,100 annual exemption allowance (the new rate after 05/04/2014) you have a charge arising on the remaining gain of £9900 -


So its not correct you were advised that the private lettings relief would cover all of the gain - and I felt it was important to advise you of that position.