What is my CGT liability when I sell my flat?

Ginger_Winner

I own the leasehold of a flat that I originally purchased 12 years ago. I lived in the flat for the first 5 years, I then let it out for the next 7. I am currently living in it now but am considering selling it in 2 years time when my current mortgage deal expires.

The value of the property today (and hopefully in 2 years time) is substantially higher than the price I purchased it for 12 years ago. Will I be liable for Capital Gains Tax on the profit or is there an exemption as this is now the home that I live in?

I quick glance on the HMRC website suggests that I may be liable for CGT for for the time that it was let out, but this isn't entirely clear to me... so I thought I'd post on here in case there is anyone who has been in a similar situation and could perhaps give me some advice.

I am flexible in my plans so if there are actions that I can take now to minimise my tax liability in the future then that advice would be very gratefully received too...!

TBagpuss

You could start with the calculator here - https://www.gov.uk/tax-relief-selling-home/y

I *think* that what they will do is take the total gain and apportion it equally, so that if you owned the property for 12 years and let it out for 7, then 7/12 of the total gain would be treated as potentially taxable. You will then be able to take off your annual allowance for the year in which you sell. If you live there for the next 2 years then you would potentially pay tax on half (7/14) of the total gain, less any allowances.

I think the last 18 months are disregarded in any case so if you sold now you might only pay tax on 5.5/12 of any gain.

Innys1

TBagpuss wrote: »

You could start with the calculator here - https://www.gov.uk/tax-relief-selling-home/y

I *think* that what they will do is take the total gain and apportion it equally, so that if you owned the property for 12 years and let it out for 7, then 7/12 of the total gain would be treated as potentially taxable. You will then be able to take off your annual allowance for the year in which you sell. If you live there for the next 2 years then you would potentially pay tax on half (7/14) of the total gain, less any allowances.

I think the last 18 months are disregarded in any case so if you sold now you might only pay tax on 5.5/12 of any gain.

This is 90% accurate. The only thing missed is a further relief called lettings relief. Google it.

booksurr

the calculation must be in months (or days if you want) not in years
your reliefs will be:
a) Private residence relief: time lived in as main home plus final 18 months of ownership (assuming you are not already living in it during the final period)

b) letting relief: This is capped at the lowest value from:
i) PRR relief calculated in a) above
ii) gain during the let period
iii) max allowed £40,000

c) personal allowance in year of sale (currently £11,600 at 15/16 rate)

plenty of example calculation on both this and the cutting tax board as this same question is asked probably 2 - 3 times per month

Ginger_Winner

Thanks for the advice and references. Very much appreciated.