Cgt

allybally1

Looking for a bit of general advise pls. I have a property that I have rented out for 20years. I am now thinking of selling it. Can anyone give me a rough idea of what kind of CGT bill I would be hit with? Is there a set way to calculate it?

I live within a few miles of the house so have thought about selling my own house and moving into the one I rent out. Would this be a better idea as I would be selling my current primary residence and making the rented house my new primary residence. Would that mean if I lived in it for a couple of years and then sold it I wouldn't have to pay CGT at all or doesn't it work like that?

pjcox2005

Hi,


Effectively any gain is time apportioned, so if you've never lived in it then you'll be taxed on the full gain - so proceeds, less original cost, less any fees incurred buying, selling or on capital improvements. You would have a capital gains allowance of c.£11k depending on when you sell, which could be doubled if you own it with a spouse. Do you have an idea how much it has gone up in value?


If you sell your main home, then assuming you've always lived there, then there would be no capital gains tax to pay.


If you move in to your rental property, then you would potentially reduce the liability but you need to keep it for a fair bit longer to have any impact on the gain as if you live there 12 months, then it would only be 12/252 of the gain that would be exempt (i.e. 4.7k of a £100k gain before the capital gains tax rate is applied - 18 or 28%). 10 years would be c.33% reduction in any gain etc.

p00hsticks

allybally1 wrote: »

Would this be a better idea as I would be selling my current primary residence and making the rented house my new primary residence. Would that mean if I lived in it for a couple of years and then sold it I wouldn't have to pay CGT at all or doesn't it work like that?

It doesn't work like that.

A lot more information is needed;

When did you obtain the property (year and month) ?
What was the market value at that time ?
What is the market value now ?
Have you ever lived in it ?

allybally1

Thank you pjcox, that is exactly the kind of info I was looking for albeit it is not music to my ears.
The value has gone up by approx. £125k

allybally1

p00hsticks wrote: »

It doesn't work like that.

A lot more information is needed;

When did you obtain the property (year and month) ?
What was the market value at that time ?
What is the market value now ?
Have you ever lived in it ?

July 1995
60k
185k
No

allybally1

eggha wrote: »

you have never lived there so the only available relief is the 11,100 personal allowance hence the calculation above

pjcox is correct that if you move into the property as your main home you will then be able to claim a proportion of the time you owned it as exempt. As long as the property was once at any time your main home the final 18 months of ownership are automatically exempt, so pjcox is wrong to show 12/252 in their example as that would always be 18/252 if the period of occupation is at the end of ownership and is itself less than 18 months duration

note carefully that a claim to main residence status is not based on duration of stay, it is based on the quality of occupation. You have to really live there as though it were the only home you owned. that is more than just a paper exercise but taking your ownership period as July 1995 - April 2017 that is 262 months

in that case the calculation would be :
gross gain 125,000 exemption 125 x 18/262 = 8,587

net gain 125,000 - 8,587 - PA 11,100 = 105,313

taking the above 25k income example again the tax in this case would reduce to (3,600 + 23,887)= 27,487 so by living in it you would save £2,153 of tax out of sales proceeds of £185,000.lot of hassle for little saving as you would then make the other property liable for the period whilst you live in this one and so unless you also sell the pother place within 18 months of moving out of that one you would potentially have to pay CGT on that thus further eroding the overall tax saving

Thank you eggha.
I plan to sell one of the properties and keep the other one. I don't really care which one. For a saving of around £2k tho u are right, more hassle than it's worth as would probably spend that on decor alone. My income is only around 10k per annum.