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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4763
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I have a buy to let house which I have been renting for

Customer Question

Hi, I have a buy to let house which I have been renting for a while, about 8 years. I have planning permission to build a 3 bed house in the side of the garden and I have built without notifying the lender, which I don't think is a big deal as it only increases their security as now they have 2 houses. However, I want to sell both of them and for that, I am going to move in to the new build and make it my primary residence.Now, the exisiting house cost me £185, as is, without planning permission the agents think I can sell for £225K or so.... with planning £260K... I have been doing some reading but I am not sure if I got it right:1- I would pay capital gains tax on the existing property after my £11.1K allowance...
2- I would pay CGT but how? if I sell the new house say for £229K, how do I know how much of that is the price of the land? is there a system to figure it out or can I make it up as I go along?
3- When do I pay this tax for the existing house plus land? when I sell existing house? or when I sell newbuild?
4- how long do I have to live in the new house to make it my legal residence for CGT purposes?
thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. 1. Yes, but if you ever occupied this house either before or after the letting period then you should be, in addition, entitled to Lettings Relief (LR) up to 40K, depending on the rentals received, also. 2. The valuation will be made by the Valuation Office Agency (VOA), part of HMRC staffed by Chartered Surveyors. Their main function is setting banding for council tax and business rates also, but they are informed of every transaction in landed property and thus have a very comprehensive knowledge of property values by location. 3. You declare the gain on your annual self assessment tax return for the year of sale and HMRC will send you a bill for settlement and advise the date that it is due. I do hope that you have found my reply of assistance.