Let to Buy

TimbaLanD

Hi all,
I let my flat I owned for 7 years to buy a house as I did not want to go through the hassle of being in a chain. Now I am worried about paying capital gains on my flat when I come to sell it. What is the best way to deal with this situation? Anyone been through the same scenario?
Thanks,

booksurr

loads of people have been through that situation and your question "please explain CGT to me" comes up very regularly

assuming it was your main/only home for the full 7 years you have owned it so far then once you move out you have a further 18 months in which to sell it before you are even exposed to CGT, notwithstanding that it is let during those 18 months

after 18 months you would then need to do a CGT calculation in which you apportion the gain between your exempt main residence (+18) period (measured in months) and your let period, but not including the final 18 months if the let overlaps with that period

for the let period you then claim letting relief

unless the gain is huge £100k ++ or you let it for many years you are extremely unlikely to have any net CGT liability at all

read this: https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet

TimbaLanD

Thank you..
The property has been let for almost 2 years now but my dilemma is should I sell it or keep it as the mortgage interest is only 50% of the rent. The value of the property has gone up by 10% in the last two years which is why I am thinking if it’s worth keeping it.

G_M

That is a competely different question!

You are now asking for investment/business advice, not CGT advice!

What capital growth, and net annual income do you anticipate from keeping it? How does that compare with alternative investments?

TimbaLanD

Hi, I now see why this is confusing. What I am trying to understand is if I keep my property rented out, will I lose the benefit of the time that I lived there after the first 18 months of moving out?
For example, when I come to eventually sell the property, would HMRC take into account the time I’ve lived in the property?
Say I purchased it for 100k, after 7 years the property is worth 150k. If I had sold it, I would not pay tax on the 50k. However if I don’t sell and let it out for another 5 years and the property is worth 200k by the time I come to sell it, would I have to pay tax on the full 100k gain, even though it was my primary residence for the first 7 years.
Hope I am making sense.