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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have purchased one bedroom in 2007 for 190000 in 2010 I

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I have purchased one bedroom in 2007 for 190000 in 2010 I have built an extension (30000 but have no invoices) and now the property is worth around 370000.
I'm now moving to Germany in October and was considering renting out this property for the first time since I purchased it.
I know that if I have not rented out the property I would be exempt from that tax.
Will I automatically become liable for the CGT and if so how can I estimate what level will I be due to pay if I sell the property in 2018 or 2019 or 2020 - does that make any difference when I sell it? Does that make any difference for how long did I rent it out?
I do not plan to come back to UK any time soon - possibly never.
What should I do?

Can you tell me why you are moving to Germany please.

Customer: replied 1 year ago.
I'm changing employer and accepted the offer in Germany - moving there for work. I have dual citizenship (Polish / British)


Leave this with me while I draft my answer. It will take a while so please bear with me.

Customer: replied 1 year ago.
No problems. I will also need to understand what is going to happen if I sell my property in UK while living in Germany. Not sure you will be able to answer that too but if yes that would be greatly appreciated!

If you don't let the property, you won't necessarily escape CGT. Take a look at HS283 for information on the main residence and CGT. Examples 4 and 9 may be of interest to you. If you don't qualify for absence relief (see next paragraph) you should qualify for letting relief if you let the property.

If you move abroad to work, you may qualify for absence relief. If you do, then provided you occupied the property both before and after your return to the UK, the period of absence would be treated as a period of occupation by you even if the property is let during that period. Read the conditions here and from CG65030 to CG65050. Click on "Next Page" to move between pages.

If you let the property whilst abroad, you will have to register as a non-resident landlord. You can read about that here.

The gain on a property that has been your main home will be split between taxable and non-taxable parts. How much will be taxable and how much will be non-taxable depends entirely on how long you own the property, how long you live in it, how long you let it for, how much it cost and how much it is sold for. Nobody can say what tax rules may or may not exist in 2018 to 2020 or whether property prices will rise or fall. CGT on property gains is charged at 18% or 28% or a combination of the two rates depending on the level of your income in the tax year you sell it. Look here for information on CGT and here for information on property gains and CGT.

I cannot tell you exactly how you would be taxed in Germany on a property gain, what exemptions and reliefs you may be entitled to for example, so you would need to take local expert advice on that. Any taxable gain as computed for UK tax purposes would be charged to CGT in the UK but you would get credit for CGT paid in the UK against your German tax liability on the gain.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.
Thanks you. I will have to read all the references and may come back with some more questions.
The one that springs to mind is around me coming back to UK at some point. For how long would I need to live in the property again before being able to sell it? I suppose it may be answered in the links you have kindly provided.
Let me do the reading and I'm sure you will hear back from me.

There is no set period but a few months would probably be sufficient. It's certainly worth thinking about.

Customer: replied 1 year ago.
Great, thanks. I forgot to mention that I'm in between decision of selling now or renting and selling it in 12-18 months.

I can't help you with that decision. Where you think property prices are going will play a part in that decision I guess.

Customer: replied 1 year ago.
I understand. The decision is linked to having to pay CGT or not and if I will have to pay CGT how big will it be in 12-18 months. The price should not change a lot in the next 12-18 months (what the agents are predicting) but then this 12-18 months could cost me a lot of money in CGT.
If I were able to sell it now I would but there seem to be some paperwork missing which will take some time to rectify and hence my whole question.

If you have lived in the property for the entire period of ownership to date, then you have 18 months to sell it after you have moved out and still not have to pay CGT. Each month of ownership after that would be a taxable month as a proportion of the whole period of ownership subject to a claim to absence relief or letting relief.

Customer: replied 1 year ago.
I have lived in this property since I purchased it in 2007 and will only move out as of October 1st 2016.
If that's the case the CGT would not be that bad?

As I said, you have up to 18 months after you have moved out to sell it completely tax free so if you sold it 24 months after moving out for example, only 6 months worth of the gain would be potentially taxable, again subject to the reliefs I mentioned.

Customer: replied 1 year ago.
Thank you - even if during that 18 months I rent it out?
I promise this is the last "but" :)

Yes. You get the last 18 months of ownership as a tax free period regardless so long as the property has been your main home at some point.

Customer: replied 1 year ago.
Thank you Tony - I think that is exactly what I was hoping to get to. I guess the fact I will no longer be UK tax resident changes nothing?

Not since 6 April 2015. Prior to that date, if you were non-UK resident, you would not be liable for CGT on UK based residential property gains unless you returned to the UK within 5 years of leaving.

Customer: replied 1 year ago.
Oh dear... So last final shot.
I leave UK in October 2016. Sell the property in August 2017 will I still apply all the conditions we came to conclusion in your previous response? The property being my only home for 9 years and then final 18 months being in the time between I left UK and sell of the property?
Or am I falling in different rules then and can't treat it like that?

Unless the rules change next year, your gain will be completely UK tax free if you move out in October 2016 and sell it in August 2017.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thanks Tony!