Capital Gains Tax

Suzanne_Louise

Hey! I moved out of my house 2 years ago (bought in 2001) and currently rent it out. The tenants that have just moved in have already said that they'd like to buy the house, but as FTB's, have more deposit to save up first. I don't want to end up paying CGT if they do buy, as have quite a lot of equity. I've been told that if I remortgage in joint names with my partner, the period of not having to pay CGT would be extened. Is this the case? I'd probably have to remortgage with him anyway, as I'm struggling to get a remortgage on my own, as they all say I don't earn enough at just under 25K per year, which I don't understand anyway, as the rent covers the mortgage! Any advice would be welcomed please........

macman

Are you the sole owner of the rented property?
Do you currently own a second property?
You don't have to pay any GGT until the gain is realised, so if your tenants have to save for another year or so I don't quite see how the issue arises at this stage.
I'm not quite sure of the relevance of the remortgage aspect.

CLAPTON

you are exempt from capital gains tax for the period it was your principal private residence (i.e. you actually lived there) plus the THREE last years

so if you have lived there from the time you bought it to 2 years ago then you have a further 1 years before cgt is chargeable

even then you can claim letting relief (max of 40k ) and you have a cgt allowance of 10,100

so you are very unlikley to have any cgt to pay even if you let the house for more than 3 years

its a bad idea from a cgt point of view to put the house in joint names as your partner wouldn't be able to claim PPR or the last three years or letting relief.

Suzanne_Louise

I am the sole owner of the rented property, yes, but moved in with my partner 2 years ago. I'm not on the mortgage for his property or any utilities.

CLAPTON

Suzanne_Louise wrote: »

I am the sole owner of the rented property, yes, but moved in with my partner 2 years ago. I'm not on the mortgage for his property or any utilities.

if you want to post up the details we can show you how to work out your potential liability

month and year of purchase
month and year you moved out
month and year you let the property

purchase price
probable selling price
any major improvement (not routine maintenance)


presumably you are declaring your profit (if any) from the rent to HMRC

Suzanne_Louise

month and year of purchase May 2001
month and year you moved out September 2008
month and year you let the property March 2009

purchase price £59950
probable selling price recently on market at £149950
any major improvement (not routine maintenance) put new kitchen in 2 years ago

CLAPTON

At the moment it's a no brainer; you have no cgt

-the gain is 149,950 - 59,995 - cost of buying/selling- (maybe) kitchen
this gain is assumed spread evenly throughout the period of ownership

-period of ownership is 9x 12 + 4 months =112 months
-as the period of it being your PPR is exempt i.e. 7x12 + 4 = 88
-plus the last 3 years i.e. 36 months


so you are exempt for 124 months hence no cgt

even if you don't sell for a while you also will have letting relief ; the lesser of the period of the let, the PPR or 40k
and you have 10,100 cgt allowance
and you can probably deduct the cost of the kitchen

do not however put any of the property in your OH's name as he wouldn't qualify for PPR or the last three years or lettting relief

Suzanne_Louise

That's great - thanks for the info! I was panicking as I didn't buy the house with the view to making money on it, it was my home and I just happened to fall in love and move into a bigger house with my OH!!!!

CLAPTON

Suzanne_Louise wrote: »

That's great - thanks for the info! I was panicking as I didn't buy the house with the view to making money on it, it was my home and I just happened to fall in love and move into a bigger house with my OH!!!!

good

but I always find it faintly amusing that it would seem people would rather make no profit and pay no tax rather than make a large profit and pay some tax
personally I'm hoping to earn enough to pay 50%

ceeforcat

There are worse Clapton - I have a client who refused to claim his state pension for the last four years (£155 per week) because he did not want to pay more tax! (Claim can only be backdated one year too)