Capital Gains Tax

56cheffy

I'm soon to be moving out of a property that I bought in 1991 for £60k, now valued at around £200k

I am considering renting it out.

I understand that if I sell it when I move out I will not be liable for CGT, as it is/was my main residence, but will be liable in the future (after 18 months) I believe.

When I eventually sell (after renting out) am I liable for CGT on the total increase in value from 1991 or from the date and valuation when I move out?

I hope that makes sense!

Thanks in advance.

silvercar

Generally the gain is considered on the total increase in value between when you bought and when you sell. Then a calculation is made on the months it was your PPR (+ the last 18 months of ownership). You also have a CGT allowance and Letting relief.

00ec25

https://www.gov.uk/capital-gains-tax/overview

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

all is explained in the above links

theartfullodger

56cheffy wrote: »

I'm soon to be moving out of a property that I bought in 1991 for £60k, now valued at around £200k

I am considering renting it out.

I understand that if I sell it when I move out I will not be liable for CGT, as it is/was my main residence, but will be liable in the future (after 18 months) I believe.

When I eventually sell (after renting out) am I liable for CGT on the total increase in value from 1991 or from the date and valuation when I move out?....

Very fair question & the advice above is correct for current rules.

You are effectively asking what will CGT rules be when I eventually sell: FK, rather obviously.. as g*wd knows what the next few chancellors will do... (or, indeed, if prices will go up or down...)

ProDave

I am in the same situation. We are now renting out our former main residence after trying and failing for 2 years to sell it.

Because the gain is assumed to be linear over the period you have owned it, and taxable for the period it is rented, in our case we have worked out (assuming no further increase in value) that if we rent it for more than 4 years, the CG tax due will exceed our two personal CGT allowances. So that is our cut off period before we cease renting it and try again to sell it.

56cheffy

ProDave wrote: »

I am in the same situation. We are now renting out our former main residence after trying and failing for 2 years to sell it.

Because the gain is assumed to be linear over the period you have owned it, and taxable for the period it is rented, in our case we have worked out (assuming no further increase in value) that if we rent it for more than 4 years, the CG tax due will exceed our two personal CGT allowances. So that is our cut off period before we cease renting it and try again to sell it.

Thanks....so an accountant should be able to do a few sums for me based on that and give me an approximate 'cut off' date?

Crashy_Time

ProDave wrote: »

I am in the same situation. We are now renting out our former main residence after trying and failing for 2 years to sell it.

Because the gain is assumed to be linear over the period you have owned it, and taxable for the period it is rented, in our case we have worked out (assuming no further increase in value) that if we rent it for more than 4 years, the CG tax due will exceed our two personal CGT allowances. So that is our cut off period before we cease renting it and try again to sell it.

Why isn`t it selling?

silvercar

56cheffy wrote: »

Thanks....so an accountant should be able to do a few sums for me based on that and give me an approximate 'cut off' date?

Yes, but so could some posters on here. All we need is the price you bought and the price it is worth now and your assumptions on growth in value.

Don't let the tail wag the dog, if the renting venture works for you then don't sell up just because you have some tax to pay. Having a tax bill means you are making money, if you give a small percent to the government, you still keep the rest!

ProDave

Crashy_Time wrote: »

Why isn`t it selling?

Been discussed before.

Large house in the Highlands. Too expensive for most locals. Usually these sorts of house would have sold to English incomers selling up in the south and buying a much larger house for much less money and having a better lifestyle.

Thanks to the SNP banging on still about independence for Scotland and wanting another referendum (in spite of the 2014 referendum being "once in a generation") the English are not moving to the Highlands. so there are lots of large houses for sale with very very few buyers wanting them.

But lets not drift this thread, if you want to discuss it more, start a new thread.

The length of time renting a former home before CGT due exceeds your allowance depends on a lot of things, how long you have owned it, how much it has risen, how long you rent it for, and whether you own it a an individual or a couple (in which case you have two lots of CGT allowance to use up as you are each liable for half the CGT)

00ec25

ProDave wrote: »

I am in the same situation. We are now renting out our former main residence after trying and failing for 2 years to sell it.

Because the gain is assumed to be linear over the period you have owned it, and taxable for the period it is rented, in our case we have worked out (assuming no further increase in value) that if we rent it for more than 4 years, the CG tax due will exceed our two personal CGT allowances. So that is our cut off period before we cease renting it and try again to sell it.

have you included Letting Relief in your 4 years to go calculation?

this may help understand the effect of LR?
http://forums.moneysavingexpert.com/showpost.php?p=72618493&postcount=33

ProDave

00ec25 wrote: »

have you included Letting Relief in your 4 years to go calculation?

this may help understand the effect of LR?
http://forums.moneysavingexpert.com/showpost.php?p=72618493&postcount=33

No I didn't know about that, so my "letting window" is now a bit longer before I would be liable for CGT.

Thank you.