Capital gains on rental property

marc3

Not sure whether to post here or on tax matters forum.

Anyway-i am sure covered previously-but can't find.


Have a rental property with a little bit of equity in it-wish to sell in next 3 years and reduce CGT obligation.

believe we can do so by living 'properly' in the property for at least 6 months.

i have no wish to cheat the system-and simply wish to know what living properly in the property involves.

Idea is we would rent main residence and move 'properly into the rental property for at least 6 months-getting all post/bills/ etc coming to the new residence- and would thus GENUINELY live there.

Is that sufficient.

Could my wife remain in our current home and me on my own live in the rental property as my main residence (rental property is in joint names )

Can any one advise please

where do i find 'the rules'

simply want to do it right.

many thanks

Notmyrealname

marc3 wrote: »

Idea is we would rent main residence and move 'properly into the rental property for at least 6 months-getting all post/bills/ etc coming to the new residence- and would thus GENUINELY live there.

Is that sufficient.

I doubt the HMRC would see it that way. You wouldn't be genuinely living there, you'd be using it as a mail drop.

Wantahouse_2

I have a similar query. We own a flat that we rent out, that is currently on the market. I think it might be cheaper if we just move into the flat we own, instead of renting where we currently are while we're putting money towards our deposit on a new place - but as its been let out in the past will we owe CGT regardless?

anselld

marc3 wrote: »

Could my wife remain in our current home and me on my own live in the rental property as my main residence (rental property is in joint names )

Couples cannot have two main residences so you would both have to move. There is no specific time limit, but as you say you must be able to show full residence. Electoral roll, bills, etc all moved plus actually living there full time such as any neighbours may witness.

Bear in mind also that during this time you are making your other property potentially CGT liable.

anselld

Wantahouse wrote: »

I have a similar query. We own a flat that we rent out, that is currently on the market. I think it might be cheaper if we just move into the flat we own, instead of renting where we currently are while we're putting money towards our deposit on a new place - but as its been let out in the past will we owe CGT regardless?

Depends on the size of capital gain and have you ever lived there as main residence.

Moving back in (if you can do it convincingly) gives you exemption for the final 3 years of ownership.

Wantahouse_2

anselld wrote: »

Depends on the size of capital gain and have you ever lived there as main residence.

Moving back in (if you can do it convincingly) gives you exemption for the final 3 years of ownership.

No, we've never lived there - it was bought as a BTL. But we're saving for a deposit for a house for us to live and start a family, and looking at our finances it might save us money to give up renting where we are and moving into the flat instead of renting it out. When we do eventually sell it we're looking at coming out with £15k after agency/solicitor fees and paying off the mortgage. We're not looking to move back in to avoid paying CGT - if we owe it, we owe it. I'm just looking at our finances and planning what we'll have when we eventually make the big move, so just want to figure out if its something we'll owe. We would only be living in the flat for about 8-12months before its hopefully sold and we can move on.

anselld

Wantahouse wrote: »

No, we've never lived there - it was bought as a BTL. But we're saving for a deposit for a house for us to live and start a family, and looking at our finances it might save us money to give up renting where we are and moving into the flat instead of renting it out. When we do eventually sell it we're looking at coming out with £15k after agency/solicitor fees and paying off the mortgage. We're not looking to move back in to avoid paying CGT - if we owe it, we owe it. I'm just looking at our finances and planning what we'll have when we eventually make the big move, so just want to figure out if its something we'll owe. We would only be living in the flat for about 8-12months before its hopefully sold and we can move on.

If you mean "we" (ie joint ownership) and the gain is only £15k then you will be covered by £10600 each of CGT exemption.

Wantahouse_2

anselld wrote: »

If you mean "we" (ie joint ownership) and the gain is only £15k then you will be covered by £10600 each of CGT exemption.

No its not joint ownership - he owns it. So whether we live there or not for the next year, he'll owe CGT on anything over £10600?

silvercar

Living properly in it means exactly that - moving in. Evidence would include notifying people like your employer, doctor, kid's school, credit card bills, library etc. A parried couple cn have only one principal residence between them. The revenue, if suspicious, may look at what you have done with your current property ie is it rented out, sold or left empty.

If the property is owned by one half of a married couple, that person could transfer half to their spouse before sale, so that each benefit from the £10,300 CGT exemption.

The basis for calculating CGT is the sale price less purchase price, less buying and selling costs less any capital improvements. The size of the mortgage doesn't come in to it.