Anyone know anything about Capital Gains?

lollypopswater

Hi Everyone,

I am currently renting my house out and back at my parents due to a bad relationship breakup which left me in quite a lot of debt.

The rental is through an agent and I have permission from my mortgage lender, landlords insurance etc so all above board on that front.

I also have a tax return form to complete and I hope that once I take off the huge fees from letting agent, wear and tear, insurances, mortgage interest etc I don't owe the tax man anything from the rental income. Bascially I'm not making anything in fact mortgage is more than the rent I just need to get myself back on my feet and can't really sell the house in this market.

My question though is around capital gains tax. Basically, there is a chance I may not want to move into my house again after I am back on my feet early next year. Mainly due to everything that went on when I lived there I wouldn't feel very comfortable.

Does anyone know if this would leave me open to having to pain capital gains tax on the differnce between purchase price and sales price? I am back with my parents at the minute so I don't have any other property meaning this is my only home but I understand that renting it out makes a difference.

Is it worth moving back in for a while and if so how long?

Thanks in advance!

googler

I don't know about it, but you and I can read about it here -

http://www.hmrc.gov.uk/worksheets/sa108-notes.pdf

and you should probably also see the para headed 'letting relief' here -

http://www.hmrc.gov.uk/helpsheets/2008/hs283.pdf

Hope this helps.

lollypopswater

Thanks googler they are useful if somewhat sore on the brain!

00ec25

Hi

the lettings relief applies, it is best to get HMRC to explain it to you in person as you may be able to make an election over which is your main residence, thats what I did.

they are very helpful on the phone and once confirmed in writing you know exactly where you stand

googler

lollypopswater wrote: »

Thanks googler they are useful if somewhat sore on the brain!

Nobody said taxation was easy..... pour a strong cup of coffee, open some chocolates, switch the phone and the doorbell off, and set aside a half hour or so - you'll be fine!

silvercar

Good point about electing which is your own home, though it won't apply in this case. If a property is let the revenue won't allow an election for it to be considered your main home.

You would get exempt from CGT for the time it was your home and the last 3 years of ownership. The proportion of the gain not exempt would then benefit from the application of your CGT allowance (currently £9,600) and letting relief worth upto 40K.

lollypopswater

Silvercar thanks very much for this.

I bought the property in September 06 and I lived in and then have had it rented since January this year and would forsee either selling or moving back in January next year as I only have 12 months consent to let.

I currently don't think that the value has increased at all since I bought it but am hopeful that my deposit is still intact though...

Am I right from your message that there would need to be more than £9,600 in profit so over and above what I paid for it for CGT to apply? Being realistic the most I would expect would be to make 5k maybe 10k at an absolute push...

I'm not sure I understand the point about 40k letting relief?

Thanks!

silvercar

If you only started renting it in January and it was your main home (prinicple private residence in tax speak) until then, you have no CGT liability. The time it was your PPR and the last 3 years of ownership are exempt from CGT.

lollypopswater

Thanks very much really helpful! :beer:

jody1_2

Hi,
I'm in a similar type situation. I bought my house for £125,000 and have a £95,000 mortgage. I don't imagine I will be able to sell it for any more than £135,000. Would they consider CGT on the £10,000 that I will make in profit, or the £40,000 difference between mortgage and sale price?

pjcox2005

The capital gain would be calculated based on the original cost, but again consider the reliefs available e.g. personal allowance, exemptions etc.