capital gains tax

jrne10706

Hi there

I bought a house in 2002 for 57.000 lived in it for 1.5 years and moved to live in london in (work accomodation)with wife.
I only own this one house

rented the house for 2years now and not sure if/how much i pay capital gains on it if I sell after 3years renting.
house is worth 140.000 now

thanks

pootle666

Hello,

The quick answer is no - you wouldn't pay any capital gains tax. As you know, you don't pay tax on your only/main residence. If you've not been occupying the property - as in your case - you also get automatic "deemed" period of occupation. These include the last 36 months of ownership, so no tax would be payable.

There is also deemed occupation for up to 4 years if you or your spouse have been required to live elsewhere because of employment. The definition of required is quite narrow though, it's not good enough to just have taken a job in London & to have rented a property nearer to work. It must be a requirement, such as a caretaker where you are required to live in or your work has sent you to a different office for a secondment - that sort of thing. To qualify for that one, you must move back into the property as your main residence prior to selling.

If you don't qualify for work related relief, above, and you exceed the three year relief (top) you would also qualify for lettings relief on a period of non-occupation. So, for example, if you had let the property for 5 years, the last three would count as deemed occupation. The remaining two would qualify for lettings relief. You would need to calculate the gain (i.e. the sale proceeds, less selling costs, less purchase price, less any enhancement expenditure) and work out how much is attributable to those two years (total gain/total months of ownership x 24). The relief is up to £40,000, so you would have to sell your property for a huge price to exceed this. So in short, you would still pay no tax - but you are required to report this on your tax return, with suitable calcuations. In the other two scenarios, you are not required to report the sale on your return. Although you will need to make a note of why you have ceased to receive property income, to stop any questions.

There are lots of other little rules, but I imagine that this is probably enough information for you.

Hope this helps.

jrne10706

thank you very much for that
funnily enough I am a caretaker in london but I wont be going back to the house to sell it
but it looks like we wont need to pay it when we sell next year

cheers