if i live in a property that was once buy to let, will i pay cgt when i sell?

JennyP

Following a relationship breakup , I've moved into a property that was a buy to let. It's too big just for me so I can't afford to stay here long-term and I'd like to sell and buy something smaller.
I would however have a large cgt Bill if I did.
If I live here for a year , will I still have that bill? I want to do everything above board and legally not try to dodge the system!

Pennywise

The longer you live in the property, the less the CGT will be as you get private residence relief for the time you live in it, lettings relief (limited to private residence relief) and also the last 18 months tax exempt.

Just how long you have to live in it to be completely free of CGT will depend on the gain, (selling price less purchase price, less costs of buying and selling), the time you've owned it, the time it's been let out and the time you've lived in it.

If you can give the figures and dates, I am sure someone on here will do the number crunching for you.

getmore4less

Last 18m and living don't count twice if they are the same date.

JennyP

The gain was made before I moved in so I don't see a way out of it
I met a buy to let landlord a year or two back who had 18 properties. He was living for six months in each then flogging them, without paying a penny in cgt. I am guessing that was illegal!

purdyoaten

JennyP wrote: »

The gain was made before I moved in so I don't see a way out of it

Not correct - post up relevant dates (purchased, letting period, dates of occupancy) and values (cost price and value now) as advised and you may be pleasantly surprised!


I met a buy to let landlord a year or two back who had 18 properties. He was living for six months in each then flogging them, without paying a penny in cgt. I am guessing that was illegal!

Not necessarily.

See above.

JennyP

I am rather reluctant to post exact figures etc! Seems very personal!

booksurr

JennyP wrote: »

I am rather reluctant to post exact figures etc! Seems very personal!

then post some hypothetical figures as you are a long way from understanding it properly just yet

alternatively do a forum search as your scenario is answered at least once every 1 - 2 weeks, for example....
https://forums.moneysavingexpert.com/discussion/5046487

in your case, becuase you are moving in at the end of your ownership period rather than the start your lived in private residence relief will be limited to the deemed occupancy period of the final 18 months even if you live there fore less than the final 18 months. If you live there longer than 18 months then it will simply increase by one for each extra month you live there ...

JennyP

Hypothetical figures:
Bought at 200k ten years ago.
Property now worth 400k.
I have just moved in and might stay one to two years.

booksurr

JennyP wrote: »

Hypothetical figures:
Bought at 200k ten years ago.
Property now worth 400k.
I have just moved in and might stay one to two years.

the calculation must be done in months not years...
lived in for 1 year
total ownership period 11 years ie 132 months
gain = 200k

private residence relief: final 18 months of ownership:
200,000 x 18/132 = 27,273

letting relief : lowest of
a) PRR: 27,273
b) gain in let period: 200,000 x (132-18)-132 = 172,727
c)max allowed: 40,000

net taxable gain: gain - PRR - LR - personal allowance
200,000 - 27,273 - 27,273 - 11,000 = 134,454

you will pay tax based on the net gain of 134,454

lived in for 2 years ownership period now 144 months
PRR : 200,000 x 24/144 = 33,333

the rest is the same basic maths as above, with such a large gain and short lived in period you will always remain liable for some tax payable as you simply cannot cover the full gain with the available relief

JennyP

Have the rules changed? I used to thi k you could move in, live somewhere for a while, then it would be cgt free?

booksurr

JennyP wrote: »

Have the rules changed? I used to thi k you could move in, live somewhere for a while, then it would be cgt free?

if you don't believe me then read the rules yourself, they have never been as you describe, apart from the deemed occupancy period at the end of ownership if you do not live in it then it is liable for that period and has always been so.
Why your 6 month serial selling LL "got away" with it is because the rule used to 36 months , now it is only 18 months so if you sold within 3 years then and only then would it be CGT exempt (or as you imply that person was cooking the books)
http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=zXscmgTSjJk&formid=3626