Capital Gains Tax

Chippet

I'm wondering if anyone can give me advice on capital gains tax.

My boyfriend bought a property from his grandad last year, with the intention of eventually living in it. However since we got together, it is less convenient that we live there together (due to my job) so are trying to decide whether to rent the property out or sell it and then buy a home of our own.

My question is, will we need to pay capital gains tax once we sell the property as he bought it fairly cheaply and work has been done on the house, which will have natually increased the valuation. He has never lived in the house.

Hopejack

If he does not own another house right now then no, if he sold it now he would not be liable for CGT. If you were to buy somewhere together and he keep the first house and rent it out then you may become liable for CGT on the profit when he does sell. There is a lot more to it than that though as you get some relief if you've ever lived in it and also you have a tax free sum each year etc.

You would be better to post on the tax thread/forum on here really to discuss your options.

CLAPTON

if he doesn't live in the house then he will be liable to CGT when he sells

the cgt will be based on the difference between the
selling price
less the buying price
less the cost of buying/selling
less the cost of 'improvements'

plus he gets an CGT allowance of 10,100
then he pays 18% of the net profit.

this may of course change in the future

CLAPTON

Hopejack wrote: »

If he does not own another house right now then no, if he sold it now he would not be liable for CGT. If you were to buy somewhere together and he keep the first house and rent it out then you may become liable for CGT on the profit when he does sell. There is a lot more to it than that though as you get some relief if you've ever lived in it and also you have a tax free sum each year etc.

You would be better to post on the tax thread/forum on here really to discuss your options.

unfortunately this is completely incorrect.

the criteria whether he is liable to CGT is whether he lives in the house and not whether he owns more than one house.

Chippet

That is how i understood it. How long do you need to live in the house for before avoiding the tax? Say could he move in for a few months and then sell?

Hopejack

We recently sought some advice on a similar issue and we were told that you are allowed to own one property and not pay CTG on it i.e. if you renting elsewhere. We did however live in the property for a short period many years ago - this may be the difference for us. Apologies for the confusion. Hope you get sorted out - it's good to look at your options now.

I do think a period of living in the property would be useful - not sure how long but I'm sure an 'expert' will come along and tell you

CLAPTON

Hopejack wrote: »

We recently sought some advice on a similar issue and we were told that you are allowed to own one property and not pay CTG on it i.e. if you renting elsewhere. We did however live in the property for a short period many years ago - this may be the difference for us. Apologies for the confusion. Hope you get sorted out - it's good to look at your options now.

I do think a period of living in the property would be useful - not sure how long but I'm sure an 'expert' will come along and tell you

who gave you this advice?

Hopejack

A friend's father who is a Tax Accountant.

Mikeyorks

Hopejack wrote: »

- but I'm sure an 'expert' will come along and tell you

One has just posted at #3 and #4 above.

A friend's father who is a Tax Accountant.

...... don't ever let him complete your Tax Return!

Hopejack

Mikeyorks - he gave us the advice just on chatting to him. He was obviously incorrect but may have misinterpreted what I had said judging by the comments here. Having said that, I would always seek and pay for advice on this type of issue if I were going to go ahead and sell anyway.

I think I've stolen the OP's thread for long enough now Hopefully someone can help her on the time he would need to live there.

[Deleted User]

I got into a bit of a panic over CGT when we bought a house before selling the old one. This is what the government website says:

You may still get the full relief even if you didn't live in your home all of the time that you owned it. The final 36 months (3 years) that you own it will be treated as if you lived there, even if you didn't, as long as the property has been your only or main home at some time during the time that you owned it.

http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm