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Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
If this property is your sole or main domestic residence then although the gain on disposal is liable to Capital Gains Tax (CGT) Private Residence Relief (PRR) applies. PRR relieves CGT at 100%. Many people do not realise that this happens when they move house as PRR is given automatically. If you buy a property to rent out then PRR does not apply save for the last 18 months of ownership when you are deemed to be in residence even if this is not the case. You would be liable to CGT at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. You would be entitled to the non cumulative Annual Exempt Amount (AEA), currently 11.1K, to offset any gain and, if you occupied the premises before or after the letting period, to Lettings Relief (LR) up to 40K to further offset any gains.
What you do with the money is entirely your own concern. You can buy another residence although you don't have to or you can fritter away the proceeds on riotous living; it is entirely at your discretion.
I do hope that you have found my reply of assistance.
As the house was your sole or main domestic residence PRR applies and any gain is taxable but at 0%. You have no CGT liability and, in any event, PRR will be given automatically. You can forget all about CGT until you dispose of your new flat at some future, indeterminate date. What you did with the proceeds of the sale is utterly irrelevant.
The new flat will have an acquisition value of 185K plus any future improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance which is allowable against rental income.
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Delighted to have been of assistance.
Thank you for your support.
Many people do not realise as the sell and move that they are liable to CGT as PRR knocks it out each time. It is usually given automatically by HMRC. Quite frankly the majority of people never know of the entitlement or its granting.
You would have heard long since, I would not worry in the slightest, just keep my reply safe to fend off any long term enquiries.