Advice on renting main residence please

charlesh

Hello,

My wife and I own a house which for the last 2 years has been our only property. Work is now taking us away from the area, so we are renting a house close to our new place of work and are considering renting our own house. It is quite possible that we'll return to live in our house in the near future, but this isn't certain at this stage.

I would like to know of any potential pitfalls with what we intend to do. In particular:

1) Does our own property remain classified as our "main residence" for tax purposes or not? We are not building up a buy-to-let portfolio, merely renting our own house out while we're working away. Are the rules different for people with certain professions (e.g. armed forces?)

2) Following 1) if we decide to sell our own house after 2 yrs, will we end up liable for CGT on any profit made? If so how will the profit be calculated - sale price in 2006 less value of house now, or sale price in 2006 less purchase price in 2002?

3) What can I offset against the rental income from our house? Interest from our mortgage? Maintenance?

Any advice would be most welcome. Thanks in advance,

Charles

Spendless

I rented out my property once
CGT you get an allowance for year plus so much per year for each year you resided in house.
Don't knowamounts

I had to ask permission of BS 1st year they only charged me same rate 2nd year put rate up (prob cos therewere a lot of BTL by then)

I only charged enough to cover mortgage -cos house was in neg equity and wanted to keeptenants as long as I could so can't comment on what you could offset against tax.

I would suggest 1st talking to your lender and then getting legal advise

MaryC

Charles,

You will need to make an election under s222 Taxation of Chargeable Gains Act (TCGA) when you move into this new house (even though you will not own it) that your own house is your main residence. This is because otherwise the actual facts prevail and the fact is that you will be living in another property. THis is really simple to do.

This election will ensure that you do not have to pay CGT on this property at any stage. There are also specific exemptions for time spent not living in the property due to having to move away for work purposes, so you should find the whole gain is exempt.

On the rental income front, you can deduct the interest paid on the mortgage, maintence costs (thought not the cost of any improvements), any agent's fees or commissions etc. Assuming you are also letting it furnished, you can also deduct either a flat 10% of the gross rental (less any council tax or water rates you paid), called a wear and tear allowance or deduct the cost of any replacement furniture.

MaryC

Rafter

I believe there is also a 3 year rule so if you move back within 3 years, CGT is ignored.

As MaryC says though, if you are only renting in the new area you should elect to keep the house you own as your principle residence.

A problem will only then arise if you decide to buy in the new area and have two houses.

It is one of the downsides of being married that unfortunately you can't claim that one of you is living in one house and one in the other, although co-habiting couples who are not married can.

alex2004

Thank you for this helpful information as I am in a close situation as I have to work in a diffferent city for a year and I am thinking to try to rent my home for some of this period to cut expenses.
Can someone explain to me what is (BS, BTL) mentioned by Spendless. Do I have to take permission from my Mortgage provider and building insurance. Do I pay tax for it
Many thanks

Robert_Sterling_3

B S Building Society

BTL Buy to Let

RS Robert Shilling ;D

charlesh

Thanks to everyone who has replied to my original post.

Charles

Slinky

MaryC

Re s222 Taxation of Chargeable Gains Act (TCGA), can I make a retrospective declaration about this? Nearly 3 years ago I moved to another part of the country to live with my partner in his house. I've rented mine out and declared and paid tax on the rental income. Although I live with my partner, we're not married, and my name isn't on the deeds of his property. I've always regarded my house where I lived for 7 years as my 'main residence' as it is the only place I own.

Within the next couple of months we are actually going to be moving into my house, as my partner has found a job in the area I used to live in, so it will be my physical main residence again. His house is being sold.

If I could put in a retrospective claim would this help me with any future CGT issues?