Capital gains tax on rental properties

conradmum

taxing wrote: »

Sell the house while you are still non UK tax resident and there will be no tax anyway provided you are away for 5 complete tax years.

Non residents don't pay UK cgt.

BUT you must stay out for 5 years or more as there are anti avoidance rules to stop people going abroad for one year - selling a valuable asset while non resident - then returning the next year.

Doesn't look like this will apply to you though, as you intend to go abroad for a while.

From the scenarios it doesn't really matter too much as there would appear to be no gain anyway once all the exemptions are applied BUT might be worth keeping in mind if your plans change and you do need to sell.

You would need to check if the country you were then it would want to tax it, though.

Regards.

Thanks for the additional information. We decided we wouldn't sell as we know too many people who have had their fingers burned by selling their homes before a big housing price rise. They then struggle to buy again when they return.

jimmo

In terms of Clapton's example at post #9 its not very important, but it is technically incorrect.
If you returned and lived in the house, you will have created a Period of Absence and, at the very minimum, 3 years of the absence can be added to the period qualifying for relief.
To illustrate that, and the final 3 years of ownership rule if we assume that you will return to the UK in 2016 and live in the house for 1 year until you sell the house in 2017 then you will qualify for main residence relief as follows:
1) periods of actual occupation: 11 years before going abroad plus 1 year after returning to the UK = 12 years.
2) Final 3 years of ownership, except that the final year of ownership has already been utilised, = 2 years.
3) The Period of Absence (2011 to 2016) is 5 years but 2 of those years have already qualified for relief under the final 3 years of ownership rule so you only have 3 years to worry about. The Period of Absence rules allow a period of absence of 3 years "for whatever reason" = 3 years.
The Period of Absence rules are applied in the way which is most advantageous to the taxpayer. see the final paragraph here.
http://www.hmrc.gov.uk/manuals/cgmanual/CG65065.htm
Therefore, in this example, you have a period of ownership of 17 years and a total period of relief of 17 years and will be completely exempt.
All the rules I have referred to are in the Helpsheet HS283.
http://www.hmrc.gov.uk/helpsheets/hs283.pdf

findingout

I thought if you lived in a house for 6 months/year? then it becomes your main residence/first home hence no CGT anyway?
Didn't think it mattered if you had previously rented it out so long as you lived back in it for that time period then sold???

CLAPTON

findingout wrote: »

I thought if you lived in a house for 6 months/year? then it becomes your main residence/first home hence no CGT anyway?
Didn't think it mattered if you had previously rented it out so long as you lived back in it for that time period then sold???

No that is totally wrong:

It works as outlined in my post above and corrected by Jimmo's post

findingout

CLAPTON wrote: »

No that is totally wrong:

It works as outlined in my post above and corrected by Jimmo's post

That doesn't make sense to me if it is your only house and therefore your main residence if you have been living there a certain time then why are you paying tax? you don't pay CGT on your main home only on additional property and land if sold?? also I thought you didn't pay CGT on money gifted to you. But that further down the line it could be claimed back if your parents gave it to you to avoid them paying carehome fees for instance and that could be proven to a degree. I thought CGT was on property and land not fluid money?? and thats how parents that could afford to buy their kids a house got away with it by giving them the money and the kids using it to buy a house>

CLAPTON

if you own one home and live in it for ther full period of ownership (as most people do) then it is exempt from cgt.

however if you own a property and haved lived in it for a period and then let it out then cgt may be applicable as outlined in the various posts above

you won't pay cgt or any tax on money gifted to you (except that the gift may be liable to IHT if the person dies within 7 years)

Cook_County

Incidentally I have seen nothing in this post indicating that the OP will be non-resident for UK tax purposes because no-one has indicated there will be a distinct break or there will be a settled purpose for leaving the UK.

There may additionally be valid reasons to have the property valued under the rules of the country where the OP is moving.

conradmum

Cook_County wrote: »

Incidentally I have seen nothing in this post indicating that the OP will be non-resident for UK tax purposes because no-one has indicated there will be a distinct break or there will be a settled purpose for leaving the UK.

There may additionally be valid reasons to have the property valued under the rules of the country where the OP is moving.

We will be non-resident for tax purposes as far as I understand it. We will only be returning to the UK for short holidays and my husband will be running his business and paying tax in another country.