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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5115
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Does capital gains tax have to be paid on a property owned

Customer Question

Does capital gains tax have to be paid on a property owned but rented out until you move in. My husband andI live in tied accommodation but own a house that we have a mortgage on and is being rented out to cover some of the mortgage until we retire and can move in. I pay rent for the tenancy on the accommodation we currently live in and my husband pays tax on the renal income from the property we own even though it falls short of the cost of repayments on the mortgage. When we retire and start living in the property, can we sell the house and buy another of the same value without paying capitol gains.
Submitted: 1 year ago.
Category: Tax
Expert: replied 1 year ago.

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.

Expert: replied 1 year ago.

Thank you for your question..

In general, any gain made on a property is chargeable to capital agains tax. There are reliefs and allowances available to mitigate the chargeable gain and therefore CGT.

If you have been renting a residential property that has been your main residence at some point during the period of ownership, then you are able to claim letting relief against the gain and reduce your chargable gain.

If the property is in joint names, then both of you would be able to claim letting relief in your own right. There is every likelihood you may not pay capital gains tax when you sell your property to buy another one of similar value.

In order to arrive at chargeable gain one would look at

total period of ownership

period covered by private residence relief as main residence

additional relief for last 18 months of ownership

further letting relief to a maximum of £40,000 per owner

and finally gains annual allowance of £11,100 per owner (current tax year allowance)

Once you have gone through the calculation you may find that what is left over is covered by gains allowance and no CGT payable.

More information on private residence relief can be found on hs283 here

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Expert: replied 1 year ago.

Hi there

Just checking to see if you require any clarification or has I answered your question.

Many thanks