Capital gains on rental property

holly_hobby

Ok well you have only rented for 1 yr, so this is your first self assessment return (unless you already use self assessment).

Could you give me dates of moving in, date of rental commencement, and (assuming you sell shortly after erc ends), an anticipated date of sale, how many names or whom will have beneficial gain from the sale of the property.

Holly

chris.lewis

Hi,

Moved in Friday 13/2/2009 (scary!!) rental started from 5th October 2011, my ERC finishes 01/06/2014 so would sell very shortly after. Also only I will gain from the property as it is in my name. I am getting married in Dec but not sure if this affects or not!

Chris

holly_hobby

You will have owned the property for circa 68 mths upon anticipated sale. (13 Feb 2009 to 5 Oct 2014).

You resided in the property as your main primary residence for the first 2 yrs and 8 months (Feb 2009 to Oct 2011)

Your property will have been rented (at date of anticipated sale) for the last 2 yrs and 7 months (nearly 8) of ownership (5 Oct 2011 to 1 June 2014)

The last 3 yrs of ownership (whether resided in as your main residence or not, is excluded from CGT calcs), which takes us back to the period when the property was still your main residence - hence there is an overlap period - and no CGT liability.

Of course, if the date of sale changes to later than Oct 2014, there will be an amendment to the calcs, and may adjust the period to bring about a CGT calc to be performed - but based on an anticipated 25k gain (on 150k selling price - of course if it sells for less, this will reduce the total gain for calc too), and the various allowances permittable off any CGT liability arising from the gain, I will stick my neck out in that event and following adjustments, there will still be no CGT liability (NB - I must say that this is not to be taken as formal tax advice, and should not be relied upon as such - although I am a suitably qualified financial consultant in the area).

Of course this is all based on hypothetical figs which you wish to be used in the assessment - and based on the fact that current permitted allowances are not reduced or withdrawn by HMRC amendments prior to your suggested/anticipated date of sale.

Hope this helps

Holly

chris.lewis

Sorry was rented since oct 2010 not 2011

holly_hobby

aaaahhh !!!!!!

You will have owned the property for circa 68 mths upon anticipated sale. (13 Feb 2009 to 5 Oct 2014).

You resided in the property as your main primary residence for the first 1 yr and 8 months (Feb 2009 to Oct 2010)

Your property will have been rented (at date of anticipated sale) for the last 3 yrs and 7 months (nearly 8) of ownership (5 Oct 2010 to 1 June 2014)

The last 3 yrs of ownership (whether resided in as your main residence or not, is excluded from CGT calcs), the period of 1 yr 8 mths when this was your primary residence is also excluded from CGT calc purposes.

Leaving us with a total of 7 months of gain open to CGT liability - which I calculate to be £2,573 (rounded) (on the assumed sale price of 150k and gain of 25k)

This taxable gain is subject to letting relief. Letting relief is the lower of the taxable gain (£2,573), the private residence relief (£22,427) or £40,000 (calc figs rounded for ease).

Therefore letting relief is £2,573 and completely extinguishes the gain, so there is no tax to pay

Of course, as stated earlier, if the date of sale changes or assumed sale/gain amounts change, there will be an amendment to the calcs. As will any adjustments to currently permitted allowances. (NB - as stated earlier, I must state that this is not to be taken as formal tax advice, and should not be relied upon as such - although I am a suitably qualified financial consultant in the area).

Hope this helps

Holly