Renting and CGT

whitebaps

Hello! I'm not sure where this forum is based, but I'm going to assume the UK as times are GMT... which hopefully means someone can help me with HMRC.

I've just bought a flat in London and have it tenanted for the next 18 months while I'm away working elsewhere. I expect I will return to London at some point in the future and was looking at the tax implications of when I do this.

It's my only flat (I'm renting where I work) but I believe I cannot register it as my primary residence as I have never lived there. A quite likely scenario is that I'll move there in 18 months' time when my job moves that direction. In which case I will have rented it for the first 18 months, lived in it for a year, and the last 3 years count as me living there no matter what I do with it.

My understanding of Capital Gains Tax means that when I sell it I will be taxed representative of the proportion of time I rented it - let's say 1.5/5 years = 0.3. If I were to make £150,000 on the property in that time that's £10,000 personal allowance and £105,000 private residence relief and £35,000 left. There's an additional Letting Relief on CGT:

The amount of relief is the lowest of:
• the amount of Private Residence Relief already calculated (£105k)
• £40,000, or
• the amount of any chargeable gain you make because of the letting (£45k)

Which in this case would be £40,000. Does this mean so long as I move into the flat for a year I can avoid all CGT? Can anyone add an opinion? There are just so many clauses which confuse it... I can see why people get accountants!

Cheers,

Jon

anselld

The last 3 year is about to become the last 18 months.
Do the calculation in months.
Keep track of buying and selling costs as these can be deducted.
Otherwise it looks about right.

silvercar

In which case I will have rented it for the first 18 months, lived in it for a year, and the last 3 years count as me living there no matter what I do with it.

Changing to 18 months shortly.

Which in this case would be £40,000. Does this mean so long as I move into the flat for a year I can avoid all CGT? Can anyone add an opinion?

Looks that way at the moment, based on your assumptions.

cheap-information

I am in a nearly identical situation but am away from London for 2 years.

I did some reading of some of the PDFs available and you should be completely exempt if you always intended to move back and have not owned anywhere else. You just need to show some proof that you were not living there due to work commitments, this can happen for up to 3 years.

whitebaps

I saw that, but it does seem to require that you lived at the property BEFORE work made you move away, as well as moving in afterwards, which is not my case.

It does seem to suggest though that as long as you have lived in the property for the majority of the time and not left it empty for any long periods unless you're making big capital gains (i.e. it ends up that £40k of extra relief is the lowest) that you should get off most of the tax.

Thanks for the help guys - I was starting to worry that renting it out immediately was going to cost me heavily in a few years.

00ec25

cheap-information wrote: »

I am in a nearly identical situation but am away from London for 2 years.

I did some reading of some of the PDFs available and you should be completely exempt if you always intended to move back and have not owned anywhere else. You just need to show some proof that you were not living there due to work commitments, this can happen for up to 3 years.

you missed this bit off your advice ...

"Certain other periods of absence from your dwelling house may be treated as periods of residence if:
• during the period, you have no other dwelling house eligible for relief, and
• both before and after the period there is a time when the dwelling house is your only or main residence."