Selling rented house and CGT

Skint_Catt

Hi, to cut a long story short my OH has a house (he's never lived in) which he has rented out for 6 yrs. The tenants are moving out next year, and to buy our own house together we will need to sell the rental for a deposit. OH is reluctant to lose 40% of our deposit to CGT.

I'm not asking how to get out/around it, but if we were to move to live in it I would have to leave my job. (Perfect time then to have babies, but then I'll be over an hour away from my family when I need the help ) What is the minimum time we could get away with living there before we can sell and not lose out to CGT (Can you tell I don't really want to go...)

Merlin_Accounts

Hi

As the house has ofr 6 years already been a let property you would not suddenly make it exempt from CGT by living in it for a short while (unless of course you were not totally honest with HMRC when you sold up - not that I advocate being dishonest).

If you lived in it for 1 year as your principal residence and then sold it only 3/7ths of the profit would be potentially subject to CGT. If you box clever and switch into joint names (assuming you are married or at least married when you switch it) you would be able to use your annual exemptions against any taxable gain thus reducing even further the tax due. The exemptions are approx £9k each.

The longer you live in the house the smaller the fraction that is taxable - so if you live in it for 3 years (making 9 years of ownership) only 1/3rd of the profit would be taxable.

Do remember that CGT is on the profits only, not the proceeds.

Skint_Catt

Sorry to sound thick - what's the difference between profits and proceeds?

Oh God, I don't want to live there that long It's unlikely that we would be married by the time we moved in - but given the timescale I hope we are when we move out!

Thank you for your reply.

Merlin_Accounts

Proceeds are what you sell the property for (after the estate agents and legal fees are deducted). Profit is the difference between the proceeds and what the property originally cost (and if any money has been spent on the property ater it was bought and which has not been claimed against the rents you can also deduct that from the proceeds).

Skint_Catt

Thank you. If we paid full CGT (40%? on profit) we'd just have enough for a desposit on a house for ourselves (but nothing left to buy a smaller rental) but OH can't bring himself to lose that much in tax.

Might just have to take it out of the equation and see how much we can scrape/save between us.

Thanks

C xx

johnllew

Capital Gains Tax is suffered at the rate of 18%, not 40%.

Skint_Catt

Ooh must have got mixed up! Sorry!

Thank you.

alared

Thanks Jimmo,
lucky we`ve got (some) people on these boards that know what they`re talking about.

johnllew

Merlin_Accounts wrote: »

Hi Jimmo

So you like the sound of your own voice I see. As someone with a quarter of a century experience in handling tax I do know what I am doing and saying - to presume otherwise on the strength of a post is ridiculous. And as for telling people not to ask any advice from me - dangerous ground to start walking on - care to do some more slagging off Jimmo? And perhaps come out of hiding and identify who you are.

Typical of a former tax man is all I can say of yourself.

Most people dont want overwhelming with the nitty gritty, and if you look at my post I wasn't hiding anything. Yes, I do tout for business too, why shouldn't I? In this particular thread however there was no specific request for the position to be computed, so I gave a general over view.

And if you look my fractions did take account of the added 3 years!!! So get your facts right if you are going to try and pick fault!

I may be a new poster to this forum but I'm no fool either!

Now now. Jimmo is a long time member of this website and generally gives good advice. We are fortunate to have opinions from both sides of the fence which can be very helpful. Your recent presence here advertising your firm will not have endeared you to anyone and certainly not your last response. You are not allowed to "tout for business" here, it's against the rules.

Merlin_Accounts

Hi Johnllew

Thank you for your contribution. If you look at my original post in this thread I never actually did any touting, and the only time I did do, on another thread, was when someone was asking for an accountant, so seemed quite reasonable to offer my services - if you know which thread it was you will note I did not push or do any hard sell; had I done so I could understand if people got upset.

I do know Jimmo is a regular contributor, but that in itself is not good reason to have a pop - does he police everyone else's postings too? A volunteer moderator perhaps?

As a newbie I guess I'm bound to tread on a few toes by not knowing the forum etiquette inside out, but unlike Jimmo I would never have a pop at someone - if I felt an answer was incomplete I would expand on it, but only if I felt it was necessary.

In this particular instance I think giving a blow by blow account of how you work the figures out may have been a bit of overkill.

I hope that this clarifies.

Edinburghlass_2

You really need to read properly the first post in the Discount Offer thread....

What's it all about?

We’ve a strict no ads rule, yet are inundated by firms large and small wanting to target MoneySavers with extra discounts, vouchers and codes.

If you represent one, this is your chance. As an experiment I’m suspending the ‘no ads’ rule but ONLY in this thread, where anyone offering a special discount, can. Plus if they’re good, I’ll put them in the weekly e-mail (which goes to 2.6m+ people). If you post about your company anywhere else on the forum other than in this discussion thread all your posts will be removed and you will lose your right to post on this forum.