Hello Margaret, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
Yes you would be liable to Capital Gains Tax (CGT) on the gain made on the ultimate sale of your property. For this purpose increases in value are deemed to rise evenly over the period of ownership. The gain is calculated by taking the selling price leass costs of sale. From this deduct the acquisition price which is the purchase price plus purchase costs plus improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance. You now have a gain.
However CGT will only apply to that proportion of the gain during which it
was let out. At point of sale you take the total ownerhip time in months and the total time let in months. From the latter deduct 18 as you are deemed to be in occupation for the last 18 months even if this is not the case. The time let in months less the 18 is put over the total ownership time to derive a factor which applied to the gain gives the amount upon which tax might be applied.
But soft, you bothe are liable for half of the gain each and you both have an Annual Exempt Amount (AEA) of 11.1K to offset any gain. Furtermore, you will be entitled to Lettings Allowance up to 40K instead of your AEA.
CGT is at 18% or 28% or a combination of the two rates depending of the individuals' income including the gain in the year of sale.
Simple, as the meerkat in the TV advert would say! You might well find the actual tax impost minimal. Finally, when you quit these shores for good do not forget to send your tax office a Form P85, available on the net, for HMRC to classify you as non resident.
Mortgages do not come into the CGT equation, however the interest element is allowable against rental income. The following are generally regarded a deductible [source, Which]:
'The most common types of expenses you can deduct are:
- water rates, council tax, gas and electricity
- maintenance and repairs to the property (but not improvements)
- contents insurance
- interest on a mortgage to buy the property
- costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)
- letting agents' fees
- legal fees for lets of a year or less, or for renewing a lease of less than 50 years
- accountant’s fees
- rents, ground rents and service charges
- direct costs such as phone calls, stationery and advertising for new tenants
The expense should be incurred wholly and exclusively as a result of renting out your property'
I do hope that I have helped shed some light on your proposals.