Capital Gains on Rented home

Add7525

Hi,

My wife and I are just about to rent out the flat we've owned and lived in for the last 8 years as we are buying and moving into a new family home.

Im trying to get my head round all the various taxes and in particular how capital gains tax will be levied if we keep the flat for more than 3 years.

We brought the flat for £152k and its currently worth about £165k at present. If we were to sell it in say 5years time would we have to pay capital gains on the increase in value from the £152k or based on the value of the property when we started renting it out i.e. £165. Im hoping the later and as bit of guarantee i'm getting a local estate agent to write me a valuation letter dated at the point of renting it out.

Look forward to peoples responses.

add7525

somethingcorporate

I think it's what you paid for it since it is an accurate version of a value rather than a price an EA would put it on the market for (get 10 EAs, you'll get 10 different prices) but I am no expert only that when I put my flat up for sale I got values that differed by £40k on a £200k property so hardly a reliable estimate.

00ec25

no question about it
CGT is based on the gain between original purchase price (152) and final selling price (?)

read the basics here http://www.hmrc.gov.uk/cgt/intro/basics.htm
and read the guide to exemptions here http://www.hmrc.gov.uk/helpsheets/hs283.pdf

Savvy_Sue

Bear in mind that if you own it in joint names, you each have a CGT allowance of (currently) just over £10,000 each year. You talk about 'we' so I'm assuming you do own it in joint names ...

CLAPTON

without doing the detailed maths, if you sell in 5 years time you would have no cgt to pay

because you have relief for the years you lived in it,
the last three years
and the period you let it out (capped at 40,000)
and your personal cgt allowance of 10,600

of course if it's jointly owned then you get two lots of cgt allowance