Capital Gains

elwappo

Hi,
I've got a couple of questions around capital gains regarding the percentage and calculation.

• Say I bought a house in 2000 for £50k
• It's my main residence for say 11 years
• I then rent it out for 3 years and then the tenant moves out
• The property is then valued at £100k today

Do you pay CG on the entire profit? Or is it based on the time it was rented? I hear there's some period at the end of owning the property that maybe exempt from CG? e.g. the last 3 years?

Also, if the property is held onto with no tenants and left empty, is there a period of time before it becomes exempt from CG, e.g 3 years from now?

Your helps MSE's would be really appreciated.
Thank you

Propertyauthor

Any property tax, be it income or capital gains is very specific to your circumstances and it can change at each budget, so you need to seek expert, property tax advice.

However, here's some things to be aware of:-

1. There is some CGT relief if you have lived in the property as your main residence, but this link will help - read the paragraph which says it's reduced from 3 years to 18 months http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm
2. There are deductions you can make from Capital Gains, including major home improvements and of course there is a CGT allowance too: http://www.hmrc.gov.uk/rates/cgt.htm
3. CGT is applied at 18% or 28% on the gains, minus allowances and deductibles, so you need to know what ownership you have with any partner and what tax rate you pay at.

The question is about the property is if it's empty does it remain your main residence or not or are you owning/living somewhere else? This may need to be agreed with HMRC.

Whatever advice you receive now may be wrong when you come to rent or sell, so please, do seek individual advice from a property tax specialist before, during and when you come to sell.

Don't forget too, there are over 100+ rules and regulations to let your property out legally, so be aware of the responsibility you are taking on when letting.

booksurr

try using the search function and do your own research:
basic mechanics here:
https://forums.moneysavingexpert.com/discussion/5046487
further example here
https://forums.moneysavingexpert.com/discussion/5035228

apply the above to your own numbers then post up your calculation and one of us will check it , remember you are liable for your own tax so you need to know how to calculate it.
It is pointless someone else giving you an answer you don't understand, much better that you get the answer yourself (and not by begging for it either!)

Spidernick

Not sure if mentioned in the links, but you would also seem to qualify for 'letting relief' of up to £40K.

If sold today based on the facts above you wouldn't seem to have any CGT to pay on this property and, along with the annual CGT exemption (if not used against other gains), this would probably be true for a number of years to come under the current rules, depending on the extent to which the property appreciates in value.

elwappo

Ok, here goes with my calculation:

- Bought Nov 2010
- Selling Aug 2014

- Lived in Nov 2000 - Aug 2010 (115 months + 18 months) = 133
- Let Aug 2010 (approx) - July 2014 (41 months - 18 months) = 23

- Gain £50k

- PPR Exemption is 50 x (133 / 156) giving (£50000 x 0.852) = £42,600
- Letting Relief is 50 x ( 23 / 156) giving (£50000 x 0.147) = 7350

- Net Tax Gain = (£50000 - £42600 - £7350) giving £50
- Personal Relief £11,000 = NO CG??

booksurr

you have grasped the methodology correctly but your calculator appears to be error prone

50x133/156 = 42,628
50 x 23/156 = 7,372

zero liability
sense check: as long as the LR is <40k you will never need to use your personal allowance (unless the PRR itself is also less than 40k, in which latter case things may be different, depending on the numbers)