Primary residence then let out?

Broontoon

Quick query: If I move house but keep my existing house and rent it out what happens to my capital gains allowance?

When I sell my original house do I pay capital gains on the difference from when I bought it or just on the change in value from when it stopped being my main residence?

If the latter then surely you can fix it to some extent by arranging a high valuation?

thequant

Broontoon wrote: »

Quick query:

Quick Answer: Fraud and Tax evasion is illegal

Broontoon

Not suggesting either - just asking a question about how the rules work.

Debt_Free_Chick

You could start with HMRC's guidance here

Broontoon

Thanks - had a look through those notes but still doesn't really answer the question

Annie1960

It is based on:

The actual price you paid for it
The actual price you sell it for

There is no valuation needed.

You get reliefs for the time you were living there, and for the final 18 months.

The link in post no 4 does give you all the information you need.

Broontoon

Thanks, My main concern is that the house I am planning to keep and rent out has appreciated in value considerably over the time I have lived in it. If I sold it now I would pay no capital gains but I have lived in it as my primary residence for 16 years. I do not want all of that capital appreciation (less any allowances) to now be taxable.

ChumpusRex

The rules are very simple. They are based on:

The price paid
The price sold
The length of ownership
The length of occupancy
Any allowances.

Everything else is irrelevant.

So, if you bought for £100k, lived there for 10 years, then let for 5 years, then sold for £300k.

The calculation would be £200k gains over 15 years = £13.3k per year

10 years allowed for primary residence
1.5 years allowed for final allowance

Gain eligible for CGT = 3.5 x £13.333 = £47k

The fact that at the time you started letting, the value was £350k and the house has not made any gains during the period of letting is irrelevant.

Annie1960

ChumpusRex wrote: »

The rules are very simple. They are based on:

The price paid
The price sold
The length of ownership
The length of occupancy
Any allowances.

Everything else is irrelevant.

So, if you bought for £100k, lived there for 10 years, then let for 5 years, then sold for £300k.

The calculation would be £200k gains over 15 years = £13.3k per year

10 years allowed for primary residence
1.5 years allowed for final allowance

Gain eligible for CGT = 3.5 x £13.333 = £47k

The fact that at the time you started letting, the value was £350k and the house has not made any gains during the period of letting is irrelevant.

The calculation is done in months, and each person gets an annual capital gain allowance (currently £11,000).

Freecall

I'm afraid that this is correct. Several people got 'stung' in the period after 2009 when house prices fell and they found themselves with a CGT bill even though they had made a 'loss'.

Unfortunately however the rules are quite prescriptive so you don't get any say in the process.

chris_aaaaa

@freecall - never heard of this one, other than for LL who ratchet up the mortgage with the value.


@OP - Also check out private residence relief (http://www.hmrc.gov.uk/manuals/cgmanual/CG64737.htm) and if you have owned it for a long time I think there might be some tapered relief.