CGT and Letting Relief

scotsgirl_3

Hi

Hoping some of the experts on here can help re trying to reduce CGT and letting relief.

Basically, scenario is as follows - Mum in law owns a house she lives in at present, but is going to sell fairly soon to move somewhere smaller. However, she also owns a second property which she could move in to for a period (after selling first home so it will no longer be in the picture.) What I'm unsure of is where she would stand with regards to CGT on the second property if she did this. It has been let out pretty much for the full period of ownership.

Second property was inherited - around 1990ish - and was worth around £120k at that point. Now worth, guestimated, £370000. There have been some renovations done on it - new bathroom, kitchen, some windows replaced, boiler, insulation. Probably a total of £10k ish.

So, can any number crunchers talk me through this? I know where she would stand if she just sold it now, but what about if she lived in it for a while first. Would she be able to qualify for letting relief and if so how would it be worked out?

thanks

00ec25

read this then post back if you do not understand it

scotsgirl_3

Thanks. I have had a read of that thread, I just wasn't sure of how it worked when things are done the other way round - i.e. she lives in the house at the end of the ownership period rather than at the beginning? How long do you have to live in a property as your PPR in order to trigger letting relief?

Also, I notice the PPR relief is equal to the last 36 months + the period lived in - I presume, if you lived in it during the last 36 months (or less) then it would just be 36 months worth? Given the figures involved, would this basically mean PPR would be 36/240th (assuming its 20 years ownership) * gain, and letting relief would probably be the same?

Apologies for all the questions but most of the scenarios online cover it from the other way round.

Also, just to add complexity (yey!) it transpires that she was not always the sole owner. Originally, the property was jointly owned with brother, and he was then bought out. How would this affect the CGT? I don't have the exact dates and figures yet, but would it be a case of doing two seperate cgt calcs for the two halfs of the property, using the value of half at inheritance for one, and the market value when bro bought out for the other?

00ec25

scotsgirl wrote: »

Thanks. I have had a read of that thread, I just wasn't sure of how it worked when things are done the other way round - i.e. she lives in the house at the end of the ownership period rather than at the beginning? How long do you have to live in a property as your PPR in order to trigger letting relief??

the test is whether it is genuinely your main residence, not how long you "live" there
read this

scotsgirl wrote: »

Also, I notice the PPR relief is equal to the last 36 months + the period lived in - I presume, if you lived in it during the last 36 months (or less) then it would just be 36 months worth? ???

correct: PRR 36/240th. The 36 month/3 year rule is just that , if it was genuinely your main residience at somepoint during ownership then you get 36 months even if you do not "live" there for the full 36 months

scotsgirl wrote: »

Given the figures involved, would this basically mean PPR would be 36/240th (assuming its 20 years ownership) * gain, and letting relief would probably be the same???

also correct - as you realise letting relief is the lower of PRR, letting period or £40K

scotsgirl wrote: »

Also, just to add complexity (yey!) it transpires that she was not always the sole owner. Originally, the property was jointly owned with brother, and he was then bought out. How would this affect the CGT? I don't have the exact dates and figures yet, but would it be a case of doing two seperate cgt calcs for the two halfs of the property, using the value of half at inheritance for one, and the market value when bro bought out for the other?

correct - BTW did the other brother do a CGT return when he was bought out?