Capital Gains Tax Confusion

KTD10

I owned a flat from 2011 to 2017. I lived in it myself except for the last two years when I rented it out as I had to move down south to study. When it became apparent I wouldn’t be moving back up North I sold it and made about £36k on it which has since been used to buy a house which is now my main home.

I just talked to HMRC and they started talking about capital gains tax. Now I naively thought as it was my main household except for the two years and the proceeds were used to buy my new house that I wouldn’t have to pay any capital gains on it but looks like I’m wrong. I’ve been reading up on it and it looks like I can at least get some relief but I can’t for the life of me figure how much I will actually owe!

Can anyone point me to a decent calculator that can help? Or if I just call up the hmrc will they work it out for me?

Thanks for any advice that can be given!

[Deleted User]

If you 'made' £36000 on it you will almost certainly pay no CGT.

You will be able to claim private residence relief for the proportion of the gain relevant to the time it was your main residence plus the last eighteen months - so that is five and a half sixths (92%) of the gain covered. The remainder would be covered by lettings relief and you also have your annual tax free exempt amount of £11800.

You will have to declare the gain though and you may wish to come back to us with regard to filling in the forms.

PS - what you did with the proceeds is completely irrelevant.

pjcox2005

If it was your only residence then all but the last two years is exempt from CGT.


The last 18 months out of those final two years is also exempt under the principal private residence rules.


You potential then have a liability for the proportion of the gain that arose in that 6 month period but you'll potentially get letting relief. Note you have to proportion it on a month basis so 6 months over total months owned.


If you have no other gains then you can use your annual exemption of c.£11k, so no other assets sold in tax year then you won't have a capital gain.


What you do with the proceeds are irrelevant, likewise if you have any mortgage etc.

KTD10

Thank you both! You've made things much clearer. I'll have a go at the forms and see how I get on.

00ec25

KTD10 wrote: »

Thank you both! You've made things much clearer. I'll have a go at the forms and see how I get on.

it may help (or may not ) if you have a read of how the CGT calculation for PRR and letting relief works manually as set out here:
https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

as the others said, with those figures, you will not have to pay any tax, but you'll need to do the calculation anyway

Pennywise

On a different topic, have you been declaring the rental income you've been receiving on your last 2 years' tax returns?

KTD10

Yeah I've been doing a self-assessment and sending that in each year. Thanks for the link above!

KTD10

Hi all,

I really appreciated your replies before and have come to filling in my tax return. I have a quick question which I hope can be answered.

Do i need to declare the rent I received before selling? Usually I would but it amounts to £860 for the entire tax year and that is before deductions for mortgage interest etc. I know the form says to only declare amounts over £1000 but as I'm claiming relief on the CGT should I still declare this or is it entirely separate?

Sorry if this seems obvious but I just want to get this right.

TIA

00ec25

KTD10 wrote: »

I know the form says to only declare amounts over £1000 but as I'm claiming relief on the CGT should I still declare this or is it entirely separate?

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690391/sa105-Notes-2018.pdf

the £1,000 allowance was a newly introduced arrangement with effect from 6 April 2017 and relates to income tax, not CGT. So if your £860 covers the period 6/4/17 to the date your tenant left and you commenced the sale then, as it says on the form ....

From 6th April 2017, any income from property, including any foreign property, up to £1,000, is exempt from tax and doesn!!!8217;t need to be reported on a tax return.