Capital Gains Tax on rental property

annagi

Hi there,

I'm hoping someone can give me some advice. My partner bought his property in 2001 and I moved in with him in 2005. Up until 2010 it was our main residence. We bought another property last year for us to live in and have been renting the original property out for 10 months.

My understanding is that we have three years from the date that we moved out to sell the property before we're liable for CGT - is this right?

If we waited until after the three years to sell the property, would we have to pay capital gains tax on the full increase in the value of the house (from 2001 until the point we sold) or just from the time that we moved out (2010 until the point we sold)?

Many thanks in advance.

silvercar

My understanding is that we have three years from the date that we moved out to sell the property before we're liable for CGT - is this right?

Correct.

f we waited until after the three years to sell the property, would we have to pay capital gains tax on the full increase in the value of the house (from 2001 until the point we sold) or just from the time that we moved out (2010 until the point we sold)?

All calculated in proportions. So if you own a house for 10 years, live in it for 6 years then rent it out for 4 years, you are exempt for the 6 years of living there plus the last 3 years of ownership. This gives you 9 of the 10 years as exempt. So you would only pay CGT on 10% of the gain. Add to that your CGT allowance (currently £10,100) and letting relief (google it) and its probably a few more years before you have a tax bill to worry about.