CGT on home which was rented now Main residence

Raphymac

Hi Folks,

I'm trying to get some advice for my mother and am hoping that someone can help me.

My mother owned a house for in excess of 10 years (Property A), then bought a second house to live in (Property . She then let out Property A for about 7 years. About 7 months ago, she sold her main residence property A and moved back into Property A as her main residence. She is planning to sell property A and buy a new house to live in.

I am unsure of how CGT will affect her given that Property A is now her main residence and she no longer owns or lets a second property.

Any advice is greatly appreciated.

Thanks

Raphymac

I've just realised I should have read that better before hitting the post button. She actually sold property B, and moved back into property A, which she is now considering selling to buy a new property. Sorry for the confusion.

RabbitMad

The law on GCT changed recently (flat rate of 18%) so I'm not entirely sure of how it now works in terms of indexation from 1982 to 199. (something) then taper relief but basically she will have to apportion the gain to the period that its been let (the final 3 years of ownership are exempt from the rental period and then I think there is a 40K allowance as it was let and her own annual CGT allowance. I would expect little or no CGT personally.

00ec25

per your figures she has owned it for 10 + 7 years + 7 months = 220 months in total
assuming that HMRC accept that her move back into property A and selling it "soon" afterwards was not done to deliberately evade CGT then she will be entitled to principal private residence (PPR) relief for the 10 years she owned it plus the last 3 years of ownership = 156 months
that leaves a period of 64 months when it was notionally let out, she will get lettings relief for this period.
Letting relief is a capped figure and is the lower of £40,000 (absolute cap) or the gain made during the lettings period (lettings cap) or the gain during the PPR period (PPR cap)

for example, say the gain she made during those 220 months was £100,000, then:
PPR relief = 100,000 x 156/220 = 70,909
lettings relief = 100,000 x 64/220 = 29,090 (this is the lowest figure compared to £40,000 or £70,909, so 29,090 applies)

so total relief available is 70,909 + 29,090 = 100,000, ie her gain would be completely exempt and no CGT would be due

the fact that she has owned the property as her PPR for so long works heavily in her favour as it means the PPR cap is unlikely to apply, but obviously if the gain is bigger then the 40,000 absolute cap may kick in - for example:

- gain 200,000 lettings relief = 58,181, therefore absolute cap applies,
total relief therefore PPR (141818) + capped lettings (40,000) = 181,818
taxable gain 200,000 - 181,818 = 18,181.
deduct annual personal exemption for 09/10 (assuming not used up on other CGT gains): 18,181 - 10,100 = 8,081 taxed @ 18% = £1,454 tax payable


you need to do the maths with your real numbers to get your own position