Capital Gains Tax

Jamsmyth

Ok so I moved out of a house I owned 3 years ago. I had a decent amount of equity in the property and small mortgage and with housing market as it was I rent it out.

I have bought another place to live in since then (2 years in July) but I am now thinking of selling my original home.

Will I have to pay capital gains on the equity gained in my original house when I sell? If so does anyone know how much?

Many thanks.

Gonzo33

As far as I am aware the last three years of ownership of the property is classed as though you resided in it, and therefore no CGT would be liable. However, as you have bought another property already I am not 100% sure that this is still accurate information.

Have you had a nosey here:

http://www.hmrc.gov.uk/cgt/index.htm

It may answer your question, although I would probably be tempted to double check with the I.R anyway.

00ec25

Jamsmyth wrote: »

Will I have to pay capital gains on the equity gained in my original house when I sell? If so does anyone know how much?

not without you posting up the following numbers:

- month and year you purchased
- original purchase price
- month and year you moved out "3 years ago"
- anticipated sales price
- anticipated sales date (9month& year)

if you want an indication then yes you are liable for CGT becuase it is now more than 3 years since you omved out. BUT as it was once your main home then you can now claim letting relief (up to a max of £40k) and you get your personal allowannce (£10,600) on top.
So given it was exmpt whilst you lived there it would have to have had a huge increae in value since leaving for you to have to pay any CGT

drummer_666

what happens in terms of CGT when you buy a property that is run down. spend say 20k on it, add 40k value

you then buy another house and rent out the first one

when you eventaully come to sell the first one will you be liable for GTC. And for the full 40k... seeing as you added the value whilst still living there

Jamsmyth

It was bought in September 2001.
Original Price was £45k
Moved out in May 2008
Sale Price £120k
Sale date Jan next year

Price increase was really just down to the market.

00ec25

CGT calculations must be done in months not years :
total period of ownership 137 months
gain during ownership (120 - 45) = 75,000

exempt amount arising from main private residence relief sep 01 - May 08 (81 months) = 75,000 x 81/137 = £44,343
plus exempt amount arising from the final 36 months rule (deemed occupation period becuase it was one your maion home) = 75,000 x36/137 £19,708
total exempt amount arising from PRR = 64,051

liable amount arising from let period 75,000 - 64,051 = £10,949
LESS
Lettings relief - this is the LOWER OF :
a) gain during PRR 64,501
b) gain during let 10,949
c) maximum allowed 40,000

letting relief available = 10,949

Total liablity
gian 75,000 - PRR 64,051 - letting relief 10,949 = 0
YOu are liable but have no tax to pay as the entire gain is covered by relief PLUS you have not even touched your 10,600 allowanxce and have another (40,000 - 10949) 29,051 of letting relief available. Your gain could be another 39,651 bigger and you would stioll have no tax to pay

You also can deduct the costs of buying and selling from the gain

NOTE 1
if you are alreay required to do a SA tax return you must declare the sale on your return even though you have no tax to pay
If you do NOT already have to do an SA return then you do not have to inform HMRC provided you have no tax to pay
see How to report a sale, disposal or gain

NOTE 2
I have assumed it was let from May 08 , it this is not so and you continued to own it but lived elsewhere then you need to do the letting relief calcualtion using the number of months it was actually let )but do not overlap/ double count the final 36 months) as you do not get letting relief if it was not (available for) let! However, given you numbers this will not affect your outcome - you have no tax to pay

Jamsmyth

thanks 00ec25!

If that does not cover the bases nothing will.