Capital gain on rented property

mroshaw

I've just sold my old house, which up until September was rented out to tenants. While I've owned the property, I've lived in the house for 20% of the time owned and rented it out for 80%.

Is it the case that capital gain is applicable to 80% of the total gain (sale price - buy price - sale costs - buy costs)? So, 28% of 80% of the taxable gain, minus the allowance (£11,300)?

Or it is more complicated than that?

ceh209

mroshaw wrote: »

Or it is more complicated than that?

It's more complicated than that.

You can get the last 18 months whether you lived there or not at the time (as long as you lived there at some point)

There's also Lettings Relief
https://www.gov.uk/tax-sell-home/let-out-part-of-home

mroshaw

This is great, thank you so much! So, I can also claim Letting Relief on the lower of chargeable gain, resident relief or £40K?

So, as an example:

I bought for: £230,000
I sold for: £380,000
My gain: £150,000
My buying and selling costs: £10,000
My allowance for 18/19: £11,700

I bought: 04/2006
I started renting out: 11/2008
I sold: 10/2018

I've owned for: 150 months
I've rented for: 119 months
Total months applicable, given 18 months relief: 101
% Months applicable: 67%
% Capital gains: 28%

Chargeable gain: 0.67 * (150,000 - 10,000 - 11,700) = £86,000
Resident relief: 0.33 * (150,000 - 10,000 - 11,700) = £38,490

So I get an additional £38,490 letting relief, being the lower of the chargeable gain, resident relief and £40K?

So, total owed to tax man ((86,000 - 38,490) * 0.28) = ~£13,300

Does that look right?

saajan_12

mroshaw wrote: »

This is great, thank you so much! So, I can also claim Letting Relief on the lower of chargeable gain, resident relief or £40K?

So, as an example:

I bought for: £227,000
I sold for: £380,000
My gain: £150,000
My buying and selling costs: £10,000
My allowance for 18/19: £11,700
-- so your gain is 140k

I bought: 04/2006
I started renting out: 11/2008
I sold: 10/2018

I've owned for: 150 months
I've rented for: 119 months
Total months applicable, given 18 months relief: 101
% Months applicable: 67%
- were there no void periods between moving out and letting, or letting and selling?
% Capital gains: 28%

Chargeable gain: 0.67 * (150,000 - 10,000 - 11,700) = £86,000
- no, 67% of 140k = 94k
Resident relief: 0.33 * (150,000 - 10,000 - 11,700) = £38,490
- no, 33% of 140k = 46k

So I get an additional £38,490 letting relief, being the lower of the chargeable gain, resident relief and £40K?
- LR is 40k as the gain attributable to the let period is 94k and PPR is 46k, both higher than 40k.

So, total owed to tax man ((86,000 - 38,490) * 0.28) = ~£13,300
- You pay tax on Gain - PPR - LR - AA
= 140k - 46k - 40k - 11.7k
= 42.3k

@28% this is 11.8k tax bill
Does that look right?

You don't need to take off the annual allowance when calculating the reliefs. The 11.7k is applied separately.

I've rounded a lot so redo the calcs on the formulas I give. Also did you have any voids between say moving out and letting the property?

mroshaw

Wow, this is amazing! Thank you SO much for taking the time to do that! I had maybe a week between moving out and letting, so nothing material.

Once again - sincere thanks for your efforts to help me with this!

Sunshinetina

The total amount of gain liable to pay to the tax man, could you put that straight into an Isa and then you won't have to pay anything?

I have a house and i am wanting to sell and need help calculating.

G_M

Sunshinetina wrote: »

The total amount of gain liable to pay to the tax man, could you put that straight into an Isa and then you won't have to pay anything?

I have a house and i am wanting to sell and need help calculating.

Yes just like with your employment income. If you pay your salary into an ISA you don't have to pay income tax.


:rotfl: