Capital gains tax on rented but sole property

J100

Hi, I would really appreciate some advice regarding CGT as everything I am reading is so confusing.

My partner owns a property which he bought in 2002 and lived in until around 2008. He then moved out of the area and rented it out until June this year when his tenant moved out. He is now cleaning it up etc getting it ready to sell.

I naievly presumed he wouldn't pay CTG as it is his only property (we live together but in my home) but now understand there is some to pay?

Please can anyone guide me in how to work out how much CTG he will have to pay?

Also as he is no longer renting it out, is it now classed as his main residence again??

Many thanks in advance

booksurr

the fact he only owns one property is largely irrelevant
CGT exemption ("private residence relief") is based on actual occupation period
- the gain is the difference between original purchase price and selling price less EA, Stamp duty and legal costs associated with buying and selling it

- the PRR is the period he actually lived there as his main residence (2002 - 2008) plus the "deemed occupancy period" which is simply the final 18 months of his ownership so as to allow for some overlap between selling one and buying another. So in total he has 5.5 years exempt

- because it was his main home, when he lets it out he is also entitled to claim "letting relief" . Obviously once let he cannot occupy it himself so it ceases to be his home and becomes liable to CGT instead as it is then an investment property even if it is the only place he owns

the maths of the calculation (which must be done in months not years) is simple - collect your own data and apply to this example, post up your results and we will check them:
https://forums.moneysavingexpert.com/discussion/5033954

CLAPTON

J100 wrote: »

Hi, I would really appreciate some advice regarding CGT as everything I am reading is so confusing.

My partner owns a property which he bought in 2002 and lived in until around 2008. He then moved out of the area and rented it out until June this year when his tenant moved out. He is now cleaning it up etc getting it ready to sell.

I naievly presumed he wouldn't pay CTG as it is his only property (we live together but in my home) but now understand there is some to pay?

Please can anyone guide me in how to work out how much CTG he will have to pay?

Also as he is no longer renting it out, is it now classed as his main residence again??

Many thanks in advance

try booksurr link but if you have any problems come back and post up buying price and likely selling price and dates (month and year) of buying and letting periods.

J100

Thank you for your replies. I have had a go of the calculation and it looks like there may be nothing to pay - fingers crossed!!

Here are my calculations...

Bought June 2002
Selling sept 2014 (estimated)

- total ownership period 147 months

- lived in property 72 months
72 months + final 18 months of ownership = 90 months

- let out 72 months - final 18 months = 54 months

Gross gain £50,000

PPR exemption... 50 x (90/147) = £30,612

Letting relief... 50 x (54/147) = £18,367


Net taxable gain
50,000 - 30,612 - 18,367 = £1,021
Less personal allowance (11,000) = nil

Does this look ok?

Thanks again

CLAPTON

J100 wrote: »

Thank you for your replies. I have had a go of the calculation and it looks like there may be nothing to pay - fingers crossed!!

Here are my calculations...

Bought June 2002
Selling sept 2014 (estimated)

- total ownership period 147 months

- lived in property 72 months
72 months + final 18 months of ownership = 90 months

- let out 72 months - final 18 months = 54 months

Gross gain £50,000

PPR exemption... 50 x (90/147) = £30,612

Letting relief... 50 x (54/147) = £18,367


Net taxable gain
50,000 - 30,612 - 18,367 = £1,021
Less personal allowance (11,000) = nil

Does this look ok?

Thanks again

well, you don't need to take 18 months off the letting period ; just 15 months
but the result is the same : NO TAX payable

booksurr

almost,
June 02 - Sept 14 inclusive is 148 months not 147, otherwise he would have to have sold in Aug 14 for it to be 147

if he lived in it for 72 months that implies he left in May 08 so the letting started from June 08. Of course if the letting physically did start in May 08 then you need to decrease the lived in figure by 1 month.

he continued to own it for another 76 months until Sep 14 during which time it was let for 73 months inclusive (Jun 08 - Jun 14) with the remaining 3 months as non rental, non lived in, ownership and those 3 fall within the 18 month deemed occupancy period

Therefore of the final 18 months of ownership, only 15 overlap with the let period, so your deduction should have been 15, not 18, otherwise you are double counting.

PRR 50 x (72+18)/148 = £30,405

LR 50 x (73-15)/148 = £19,595

net taxable gain: 50,000 - 30,405 -19,595 = ZERO
there is no need to utilise the personal allowance at all

J100

Excellent, thank you both so much for your help.