capital gains, am i liable?

OnTheUp_2-2

I am an absolute novice when dealing with any taxation issue so please bear with me..

We brought a property in 2004 and lived in it until march 2008, we had to move out (loooong story) and live with my parents and the house has been vacant for 14 months.. we do not want to live in the house so are considering letting it but have read about capital gains tax should we decide to sell in th future..

please could anyone explain how this would affect us? Also if we did rent it out we would get approx £900 a month but would pay £905 mortgage, therefore would we have to pay any tax on that?

many thanks

OnTheUp_2-2

I have read about this 3 year relief, perhaps this would apply? But does that mean i can only let for another year as the property has already been vacant a year

fengirl_2

The period during which you lived in the property will be exempt from CGT as will the final 3 years of ownership before it is sold. In additiona, there is relief of up to £40,000 in repsect of the period it is let.
An example:
Suppose you sell the house in 2014, having owned it for 10 years and the gain in £100,000, ie the difference between the purchase price and the selling price is £100,000.
The 4 years you lvied in it are exempt
The final 3 years are exempt.
Therefore the exempt part of the gain is 7/10 x 100,000 = 70,000
Gain 100,000 - exempt 70,000 = chargeable gain 30,000
However, as you let the property, relief of up to £40k is due, ie £30k in this case, which means no CGT is due.
As to the income tax due on the rent, only the mortgage interest is allowable for tax, but you also need to include other costs which you incur such as insurance, agents fees, repairs, etc.