CGT on BTL property where i have lived

molit

I plan to sell one of my houses next year to release the equity.
I am a high rate tax payer.


It was my primary residence for 2 years, and when I sell it, it will have been rented out for 5.When I left, shortly before I remortgaged and got a valuation for £250k. I should be able to sell it for £330k next year.


I have seen a number of different calculations so I wanted to know what the likely CGT bill will be, so I can do some planning.
Also, what could I do to minimise this bill?

pjcox2005

Early morning so check the calcs but any tax would be minimal in your situation.

80k gain on property, first 2 years exempt as you lived there and last 18 months of ownership. So 3.5 of the 7 years reducing any gain to £40k.

You'd also be entitled to letting relief which would be the lower of the principal private residence for the period or £40k. If I recall its a 3 year restriction so 3/7 of £80k.

The 0.5/7 of £80k gain left over would oresumanly be covered by your annual exemption allowance of c.£10.5k if you haven't already used it. If married you could also use your partners capital gains allowance as well.

booksurr

pjcox2005 wrote: »

Early morning so check the calcs but any tax would be minimal in your situation.

it was indeed early morning,

molit wrote: »

It was my primary residence for 2 years, and when I sell it, it will have been rented out for 5. When I left, shortly before I remortgaged and got a valuation for £250k

the value when you left / re-mortgaged is irrelevant

your gross gain is the difference between the original purchase price 7 years ago (less any buying costs such as legal fees and SDLT) and what you sell it for (less EA and legal fees)

let us guess you purchased it for 240 (2 years before your 250 re-mortgage valuation) at the 2009 housing market doldrums giving you a gain of 90k (ignoring costs for simplicity)

as pjcox says your private residence relief is 90k x (3.5/7) = 45,000 (technically it should be in months not years)

letting relief is however capped at the lowest of:
a) PRR (45,000); or
b) gain during the let period (excl final 18 months) which in your case would be the same figure 90k x (3.5/7) = 45,000; or
c) max allowed £40,000

your net taxable gain in this example would be 90 - 45 - 40 = 5,000. You can then claim your personal allowance (currently 11,100) assuming it's not been used on other gains in that tax year
so, 5,000 - 11,100 = zero

you have no tax to pay, subject, of course, to you using the correct figure for the original purchase cost and deducting (documented) fees and costs

note as you state you will sell "next year" the personal allowance will have increased by then

molit

ah, thanks for the input, tis then becomes a bit more complex, as I bought it as a fixer upper, and had an extension built, so purchase price was 170 iirc with about 50k work of work on it. I guess this means a slightly higher tax impact, but not as bad as a feared?

saintalan

Hi Molit see here

Allowable costs
For Capital Gains Tax purposes, you deduct
your costs to work out the gain or loss on the
sale or disposal of an asset. Only some costs are
allowable. These include:
•
the price paid to buy the asset
•
the costs of any improvements made to your assets
– but it must be reflected in the asset when you
dispose of it
•
incidental costs of acquiring or disposing of
the asset, such as Stamp Duty or Stamp Duty
Land Tax