selling former principal residence

Old_Git

I bought a house in August 1997 for £39,000 .I lived in it until June 2013 .It is currently worth £94,000 but was worth that when I moved. I am thinking of selling it this year .
The tenant has lived in it from August 2013, will be moving out before Easter .

I assume by the time I sell I wont have lived in it for a least two years .Will I have to pay tax on any profit .

kinger101

Old_Git wrote: »

I bought a house in August 1997 for £39,000 .I lived in it until June 2013 .It is currently worth £94,000 but was worth that when I moved. I am thinking of selling it this year .
The tenant has lived in it from August 2013, will be moving out before Easter .

I assume by the time I sell I wont have lived in it for a least two years .Will I have to pay tax on any profit .

OK, you get princpal private residence relief (PPR) for the entire period you lived in the property. As you once live in the property, you also get an additional deemed PPR for the last 18 months of ownership.

After that, you qualify for letting relief (LR) which is the lower of;

(a) the gain attributed to the let period;
(b) the amount of PPR claimed; or
(c) £40,000

The only values that matter as far has HMIT are concerned is how much you bought it for, and how much you sold it for (though fees can be included in base cost and deducted from sales proceeds).

Let's assume you sell for £95K (we'll ignore fees) in August 2015

Total period owned = 216 months (18 years)

PPR for Aug 1997 to June 2013 = 190 month, plus March 2014 to August 2015 (last 18 months) = 208 months total.

LR = 8 months (you can't double count PPR months)

So sales proceeds = £95,000
less cost -£38,000

Gain = £57,000
PPR = 57K*208/216 -£54,889
LR = 57K*8/218 - £ 2,111

Taxable gain £0

Hope this helps.