Capital Gains Tax Query

EL321

I wonder if anyone could tell me what my situation is with regards to Capital Gains Tax. I have read information on it but am confused!! This is basically my situation:-

In 1999 I bought a property and in October 2005 I rented it out because I was moving out of the area to become a student (origianlly for 3 years but ended up being another extra year to do teacher training). The plan was to come back to the property, however situations change and I am now living in a different area with my partner and have just put my property on the market so that we can have equity for a new property. I am now doing my teacher training and have given my tenant notice until the beginning of May.

One option I have if the property does not sell between now and the summer is to actually live in there and work there over the summer until the new term begins in September (meaning it cancels out the renting period????).

Also - how do the government know to claim this tax - do I have to fill in a form?

Yes I am igronant about this - igronant is bliss regarding £ in my view, until it affects me!!

Any advice to this very confused brain would be much appreciated xx

CLAPTON

firstly- did you actually live in the house between 1999 and 2005?
how much did you pay for it
how much is it likely to sell for


presumably you are declaring the rent for tax purposes?

EL321

Yes I did live in the house between 1999 and 2005
£41,000
around £100,000

Yes

silvercar

Capital gain = 100-41k=59k less buying and selling costs, say another 3k.

So gain is 56k.

Of the 10 years ownership, 6 years were as your principal private residence and so exempt from CGT as are the last 3 years ownership (asit once was your CGT). Add to that letting relief and your CGT allowance (currently 9,600) and there shouldn't be any CGT to pay.

You do declare the sale on the tax return for the relevent year.

CLAPTON

The 'gross gain ' will be 100,000 less 41,000 (less any selling costs)
gross gain is 59,000 then

you need to work this out in months so I'll just guess that you bought it in January 1999 and you sell it in August 2009


so period of ownership is 10 years and seven months = 127 month
lived there for 6 years and 10 months = 82 month
let is for 3 years and 7 month = 43 months

so gross gain is 100,000 less 41,000 = 59,000 (you can also deduct any selling costs)

you are allowed to discount your period of living there plus the last 3 years so

gain is reduced by 82+36 = 118 months
i.e. 59,000 x 118/127 = 54,818

so reduced gain is now only 4,181

now you are allowed letting relief for the period of letting but in any case you have a CGT allowance of 9,600

so you pay nothing.

EL321

Thanks very much for replies, very helpful