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  • FIRST POST
    afordom
    Capital Gains Tax on sale of rented property
    • #1
    • 29th Jan 13, 7:38 PM
    Capital Gains Tax on sale of rented property 29th Jan 13 at 7:38 PM
    Dear all,

    I am slightly confused regarding my potential liability for capital gains tax on the sale of a property I own. I purchased the house in 2003 for £92000 and lived in it until 2008. Ever since, the property has been rented out and I now own another property some distance away which I live in and is my only residence. I would have chosen to sell the property back in 2008 but felt prices were so deflated that I chose to rent it instead. I would call myself a reluctant or accidental landlord in this sense.
    I have been told by the accountant that does my tax return I would be liable for some CGT on the sale of the property, especially as I haven't lived in the house in the last three years. This would seem to contradict other advice I have been given regarding 'Lettings Relief' I would be able to claim if I sold the property. My accountant has talked about switching my main residence etc before the sale but this all seems a bit of a faff to me, especially if I am not, in fact liable for CGT at all. If I sold the property now, (which I am considering) I think I would probably get £140,000 on a good day.
    Any help or advice very much appreciated.

    Alistair
Page 2
    • purdyoaten2
    • By purdyoaten2 10th Jan 18, 5:48 PM
    • 790 Posts
    • 368 Thanks
    purdyoaten2
    Excellent summary.

    But what is this "3 year rule"?

    I thought the last 18 months was exempt from CGT if it had previously been your main residence?

    I will be in a similar position soon so trying to understand how many years I can rent it before it becomes due for CGT.
    Originally posted by ProDave
    The 3 year rule that is now the 18 month rule as mentioned a few times in the thread.
    purdyoaten lost his password
    • 00ec25
    • By 00ec25 10th Jan 18, 6:53 PM
    • 5,800 Posts
    • 5,256 Thanks
    00ec25
    Excellent summary.

    But what is this "3 year rule"?

    I thought the last 18 months was exempt from CGT if it had previously been your main residence?

    I will be in a similar position soon so trying to understand how many years I can rent it before it becomes due for CGT.
    Originally posted by ProDave
    LOL

    a lesson to learn quickly on these boards is to always look at the date of the first post before replying to it

    had you done so you would have seen it was dated FIVE YEARS AGO in Jan 2013

    the fact the 3 year rule became the 18 month rule was then mentioned 2 years later in kinger101's post from the year 2015

    always worth reading from the front before replying to later posts as threads do go off course over time and may be repeating themselves or asking totally different questions if you just skip read them.
    • carolinerutter
    • By carolinerutter 16th Jan 18, 11:46 AM
    • 6 Posts
    • 0 Thanks
    carolinerutter
    capital gains on sale of rental property
    We have a similar problem. Bought house for buy to let in 2007 for £144,500 - just before property prices collapsed. Now have to sell as interest only mortgage is up and we are too old for it to be renewed (also feel the time is right). Had an off today for £185,000. With esrtate agent and solicitors fees expect this to come down by up to £4,000. = £36.500 left. We put the deposit (£20,000) for the house on our own mortgage at time of purchase. This means we should receive around £56,500 at the time of the sale. We have spent considerable amount over the past 10 years on items such as central heating, double glazing , external repairs and maintenance. We have never lived in the property. We obviously have not made anything like the amount of increased equity which we had originally hoped for, but do not want to lose out further with CGT. We have another buy to let property which we will also need to sell in 2 years time. Is it worth moving the equity from our first sale to pay off this interest only mortgage. How can we avoid paying CGT?
    All advice gratefully received
    • silvercar
    • By silvercar 16th Jan 18, 6:12 PM
    • 36,423 Posts
    • 153,946 Thanks
    silvercar
    Basically CGT is on the gain in property value, forget mortgages/ deposits/ moving equity etc they are irrelevant.

    You have a £36,500 gain, £18,250 each. Less CGT allowance of £11,300 each leaves £6,950 chargeable at 18% or 28% depending on your tax situations.
    • Lexxi
    • By Lexxi 18th Jan 18, 4:00 AM
    • 2,113 Posts
    • 2,881 Thanks
    Lexxi
    This thread is so helpful! Could someone let me know what I would be expected to pay please? I owe money to my parents for the house so I'm not sure what would be best to do as I haven't 'gained' as much as it may say on paper.
    I purchased in October 2005, the house was valued at £77,000 I bought it for £50,000. I then borrowed a further £10,000.
    The house was rented out from march 2009- feb 2013 with about 4 months of it being empty.
    I then lived there for just over 12 months. It was rented out again April 2014 until now.

    The house is probably worth about £84,000 now.
    My parents are going to need their £27,000 back when they retire. I'm not sure whether I'm better off borrowing it or waiting until the house is sold

    Thanks
    • 00ec25
    • By 00ec25 18th Jan 18, 8:25 AM
    • 5,800 Posts
    • 5,256 Thanks
    00ec25
    This thread is so helpful! Could someone let me know what I would be expected to pay please? I owe money to my parents for the house so I'm not sure what would be best to do as I haven't 'gained' as much as it may say on paper.
    I purchased in October 2005, the house was valued at £77,000 I bought it for £50,000. I then borrowed a further £10,000.
    The house was rented out from march 2009- feb 2013 with about 4 months of it being empty.
    I then lived there for just over 12 months. It was rented out again April 2014 until now.

    The house is probably worth about £84,000 now.
    My parents are going to need their £27,000 back when they retire. I'm not sure whether I'm better off borrowing it or waiting until the house is sold

    Thanks
    Originally posted by Lexxi
    are you really unable to put your own numbers into the worked examples shown several times in this thread? The mechanics don't change, just your numbers.

    try this one if you want to see another version of the same PRR and LR calculation. At least try and work it yourself, we will tell you if it's correct
    http://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2
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