Capital Gains Tax on Main home which is rented

cheap-information

Hi everybody,

I just want some advice on Capital Gains tax.

I have moved out of London due to being sent elsewhere in the UK for my job for 2 years but I plan to move back to London after this time.

Due to this, I want to invest in a 2 bedroom flat in London. I am currently negotiating on a property. I have no other property and I am a first time buyer.

For the first 2 years, I will be aiming to rent this property out to gain rental income, but after two years I will want to move into the property to live in.

I know that people's main homes are tax exempt from CGT but because I am renting it out for the first 2 years, does this still apply?

Any help would be much appreciated!

mrginge

Thats good going, as many lenders will not give a BTL mortgage to a FTB.
This of course means that this flat is not your main home as you are running it as a business.

G_M

Capital Gains Tax on Main home which is rented

Contradiction!

If it is rented it is not your home, main or secondary!

CGT.

And don't forget income tax too!

New Landlords (information for new or prospective landlords)

cheap-information

Thanks for the replies. But what happens if it is initially rented but I then move into it after 2 years so that I can live in it? It will then be my main house.

eddtheduck

All the info you need should be here: http://www.hmrc.gov.uk/helpsheets/hs283.pdf

There may be a way for you to get full relief on the property if you occupy it as your main home both before and after the period you are absent - see 'Period of absence' on pp. 4-5.

Even if you cannot do so, you will still be eligible for relief for the period you do occupy it as your main home. For example if you let it out for 2 yrs then live in it for 10, 10/12ths of the gain is entitled to relief.

'Letting relief' (see p.6) would also be available and that would almost certainly cancel out the remaining 2/12ths (what the previous poster said is incorrect - you do not have to occupy the property as your main home before you let it out to obtain letting relief, as long as you do so occupy it before you sell it).

Also, both the buying and selling costs (eg solicitors'/estate agent's/surveyor's fees/stamp duty) and costs of improvements you make to the property* can be deducted from the gain before calculating any fractions.
You would have to keep careful records and put all your calculations down on your tax return, but you could very well end up with having no CGT to pay.

*this means new stuff - like installing a central heating system where one does not previously exist in the property - as opposed to making replacements.