two properties - tax penalties

stingrayj

Would appreciate some advice, thanks

We have two properties, one is let on a minimal rent as place is in poor condition, ex council but in London, the other is our family home.

The three year dual property issue is coming up in 4 months. Ideallly would like to keep the flat we rent out as prices are still rising fast (prob not for much longer yes).

What are the tax penalties though? Neither my wife or I earn much, or pay much tax, but is this taken into account?

thanks for all help

Ian_W

stingrayj wrote: »

The three year dual property issue is coming up in 4 months. Ideallly would like to keep the flat we rent out as prices are still rising fast (prob not for much longer yes).

Don't understand what you mean by this. If the rented property was once your main home then the time you lived there and the last 3 years you owned it will be discounted for CGT purposes whenever you sell - it isn't as cut-off point. So if you lived there 2 yrs and owned for a total of say, for examples sake, 7 years then 5/7 of your capital gain would be discounted. In addition you can also claim letting relief up to a max of £40K if the house was once your principal residence. See:
https://www.hmrc.gov.uk/pdfs/2003_04/capital_gains/ir283.pdf

So your capital gain would have to be quite substantial to become taxable bearing in mind you also have jointly around £18K annual personal CGT allowance. If you do have to pay any your lack of earnings will mean you'll pay at the lowest rate, only moving to 40% if the gain and earnings take you beyond the HR threshold.