Second property - CGT question

mpartrid

Hello

I am after a bit of advice, been looking on Google but am finding mixed answers.

We are currently trying to sell our house (primary residence as it is the only house we own), we are unable to sell it at the moment so we are considering borrowing money against the house, renting it out and buying the house that we want. At that point we would move into our new house and our current house would become our secondary property. If we were to rent it out for more the 3 years and then sell it then we would be liable for CGT on any profit.

My questions is would the profit be calculated based on the value of the property when we bought it 7 years ago (approx 140k) or the value when it becomes our secondary home (approx 190k) ??


Thanks

Matt

Mister_E_4

If you rent it for more than 3 years you potentially have a capital gain as your private residence relief covers all your actual residence plus the last 3 years.
However there is a "lettings relief" which is available for a property which has been your main residence and is let as residential letting. The maximum amount of this relief is £40,000, and this is each if you own the property jointly, so potentially £80k relief. You may not get the full £40k relief as it depends on other figures so once the 3 years is up I suggest you get a professional to look at the figures (or ask on here!).

The profit would be based on the cost of the property when you purchased it, not the value.