Capital gains

Acko1

Hi, due to a severe disability I moved into a bungalow 6 months ago, fortunately I was able to buy the property before selling my old terraced home. The old house needs a bit of TLC work before putting it on the market and a friend of mine is looking for somewhere to live in the short term, I’m thinking of letting them live there rent free for 6 months in lieu of doing the TLC on the property. Obviously after the 6 months we would have to revisit the situation with a view to either agreeing a nominal rent or selling it. I never really wanted to rent we’re just helping each other out. What would be my position in relation to capital gains tax on selling? There’s also a matter of recouping the outstanding stamp duty on the new house to consider. Thanks

ProDave

A property that has previously been your main residence qualifies for an 18 month letting relief. So put simply you can rent it for 18 months then sell it with no CGT liability.

After that it;s based on how long you owned it and how long you rented it. For CGT it is assumed any gain is entirely linear from the time you bought it to the time you sell it. They break it down into months, so they work out the gain each month, then if letting for more than 18 months that monthly gain is taxable.

Then there is your CGT allowance. So even if you let it for 2 years, it is very likely the capital gain would be under your allowance so nothing to pay.

If the property is jointly owned then you have two lots of CGT allowance to use up.

We are letting our former home and taking all that we recon we can rent it for about 4 years before any CGT would actually become payable.

00ec25

the 18 month period is not "letting relief", it is an extension of your private residence relief (PRR)

PRR makes the property exempt for the whole period you occupied it as your main home plus, if you have then moved out, the final 18 months of your ownership if live elsewhere

once you start letting a property (and receive rent, not a freebie) then, and only then will you also be able to claim letting relief (LR) which has very different rules to those applying to PRR

for a property which was once your home, the combination of PRR and LR make it very unlikely you will ever have to pay CGT unless the gain you make is massive and you let it for a very long time