Working out the tax to pay on BTL

chris.lewis

Hi,

I have a question re capital gains tax. I have a property which I bought in 2009 and lived in before renting it out. I would like to sell it in April 2017 when the fixed rate ends and wonder if I will need to pay capital gains. Details are:

Bought in Feb 2009 for £125,000
Will likely sell for around £215,000 (assuming the market doesn't crash)

I lived in the property for two periods totaling 44 months the rest of the time it has been rented. I have read about private residence relief and letting relief but not sure if one or both apply and if I would still have to pay tax.

I will of course look to seek advice before selling but was looking for an indication from some experts on this forumn.

Chris

kinger101

You're entitled to;

(a) PPR relief for the period you lived in it;
(b) deemed PPR for the last 18 months of ownership
(c) letting relief for the rest of the time, which is the lower of;
(i) the PPR;
(iii) £40,000;
(iii) the remaining gain.

So if you sell for £215K, the gain is £90K. You've not said WHEN in 2009 you bought it, so I'll use January for illustration, and assume the sale completes in April 2017. So ownership = 97 months. I'll also assume that the 44 months you lived in it will not be the last 18 months of ownership.

So, PPR = 44+18 deemed months = 62 months

=£90,000 x 62/97 = £57,526

Letting relief = £90,000 x 35/97 = £32,474 (lower than £40K and PPR)

So this brings your gain to nil.

If you did have a gain, the first £11,100 is covered by the CGT annual exemption (rates have not yet been set for 2017/18).

chris.lewis

Thanks a lot for the reply all seems to make sense! Much appreciated!