Main residence CGT?

julian30

Hi,
Hoping there's someone who can help us here.
We have lived in our current property (only property) for 5 years and are planning shortly on travelling around the world for 2 years and renting our home out during our travels. Once we have finished we currently plan on returning and selling our property. Currently the property has increased in value by £100k.
My questions are:
1) Will we have to live (main residence) in the property when we come back to sell?
2) If so, for how long?
3) If we do have to pay CGT (assuming no further value increase in the 2 years) and we're a married couple does anyone have a clue roughly what our tax bill would be?
4) How (if at all) does the recently announced (in the Budget) 18 months reduction to 9 months change or complicate our plans?

Many thanks, hopefully someone can help partially at least.

silvercar

1) Will we have to live (main residence) in the property when we come back to sell?

You will get relief for the time it was your main residence and the last 9 months of ownership. If you live in it when you come home, that time will overlap with the last 9 months of ownership.

3) If we do have to pay CGT (assuming no further value increase in the 2 years) and we're a married couple does anyone have a clue roughly what our tax bill would be?

Gain is 100k, ownership for 84 months of which 60 months as main residence. 60+9=69. 69/84 x 100 = 82k exempt. Leaving 18k. CGT allowance of £12,000 each. So no CGT to pay.

julian30

silvercar wrote: »

If you live in it when you come home, that time will overlap with the last 9 months of ownership.

Sorry, not sure what you mean about the overlap, will it make any meaningful difference if we're back in the main residence for 1 month or 6 months?

Many thanks.

00ec25

julian30 wrote: »

Sorry, not sure what you mean about the overlap, will it make any meaningful difference if we're back in the main residence for 1 month or 6 months?

Many thanks.

it means the final 9 months of ownership are always exempt whether you live there or not

so overlap because if you live there for 1 month or 6 months you will still get the final 9 months exempt anyway, so your living there ... overlaps

julian30

So, if I understand correctly then if we were abroad for 24 months, lived here for 3 months (whilst selling) then it would look something like this (assuming further £20k increase) :

Gain is 120k, ownership for 87 months of which 63 months as main residence. 63+9=72. 72/87 x 100 = 82.75k exempt. Leaving 37.25k. CGT allowance of £12,000 each. Leaving £13.25K eligible for CGT to pay, of which (assuming lower rate tax) would be 18% (£2,385).

Is that (roughly) correct?

theartfullodger

julian30 wrote: »

Hi,
Hoping there's someone who can help us here.
We have lived in our current property (only property) for 5 years and are planning shortly on travelling around the world for 2 years and renting our home out during our travels. Once we have finished we currently plan on returning and selling our property. Currently the property has increased in value by £100k.
My questions are:
1) Will we have to live (main residence) in the property when we come back to sell?
2) If so, for how long?
3) If we do have to pay CGT (assuming no further value increase in the 2 years) and we're a married couple does anyone have a clue roughly what our tax bill would be?
4) How (if at all) does the recently announced (in the Budget) 18 months reduction to 9 months change or complicate our plans?

Many thanks, hopefully someone can help partially at least.

Nobody knows as nobody knows what the CGT rules will be in some 2 years time.



Others may/have tell you the answer under todays regime.

00ec25

julian30 wrote: »

is that (roughly) correct?

no, it isn't, we have explained the overlap, you have ignored it

60 months lived in as main residence
24 months travelling
3 months lived in on return to UK
ownership period 87 months of which 60 + 9 = exempt
87 - 60 - 9 = 18 liable

now do the sums again

look here for step 5 and what CGT rate actually could apply
https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

Mutton_Geoff

Also, the value at a point in time is irrelevant. It is total gain over period of ownership that is applied to the calculations as shown above.

silvercar

Gain is 120k
Ownership for 87 months of which 60+3 months as main residence. 60+9=69. 69/87 x 120 = 95.17k exempt. Leaving 24.83k. CGT allowance of £12,000 each. Leaving £830 eligible for CGT to pay.

You can also allow for the buying and selling costs, so I doubt you would have a CGT bill.

Even if you have a relatively small bill, you have gained massively.

saajan_12

julian30 wrote: »

Hi,
Hoping there's someone who can help us here.
We have lived in our current property (only property) for 5 years and are planning shortly on travelling around the world for 2 years and renting our home out during our travels. - how will the property be managed while you are travelling? Legally you must provide an address in England&Wales for for the tenants to serve notice to etc, but practically how will you find best tenants, check deposit etc handled,get repairs done etc.. You can get an agent but typically they aren't perfect don't have your property at heart. The buck stops wiht you.
Once we have finished we currently plan on returning and selling our property. Currently the property has increased in value by £100k. - okay, but the actual selling price / value when you sell will be relevant, regardless of when portions of the gain were made.
My questions are:
1) Will we have to live (main residence) in the property when we come back to sell? - of course you don't have to. In fact it can be hard timing your return and getting tenants to leave, so you'll either be left with a long void or have to rent elsewhere yourself if you want to move in.
2) If so, for how long?
3) If we do have to pay CGT (assuming no further value increase in the 2 years) and we're a married couple does anyone have a clue roughly what our tax bill would be? - if you sell now, £0 CGT. If you sell after letting, then calculate your gross gain less buying / selling costs (eg estate agents, solicitors etc). Then, you get private residence relief for the time you lived there plus last 18 months (9 months after 2020). You also get £12 allowance each and upto Apr 2020, you get letting relief capped at 40k for the time it was let.

4) How (if at all) does the recently announced (in the Budget) 18 months reduction to 9 months change or complicate our plans? - If nothing changes, ie no further value increase, you sell after 2 years, and no rules change then you'll likely have no CGT either way. If the value increases or sell later etc, then the 9months change and removal of Lettings relief will mean you have some / more CGT than before.

Many thanks, hopefully someone can help partially at least.

julian30 wrote: »

So, if I understand correctly then if we were abroad for 24 months, lived here for 3 months (whilst selling) then it would look something like this (assuming further £20k increase) :

Gain is 120k, ownership for 87 months of which 63 months as main residence. 63+9=72. - No, the 9 months is from assuming you live there for the last 9 months. you can't double count the last 3 months that you actually live there. So 63 months living there + (9-3) = 6 months assumed to live there when you actually didn't.
72/87 x 100 = 82.75k exempt. Leaving 37.25k.
- 69 months Residence Relief = 69/87 x 120k = 95k. Leaving 25k.
CGT allowance of £12,000 each. Leaving £13.25K eligible for CGT to pay, of which (assuming lower rate tax) would be 18% (£2,385).- Leaving £1k @ 18% = £180

Is that (roughly) correct?

Re the CGT, you can't double count the 'assumed last 9 months residence' if you actually live there during any of that time. However I think you're mixing up 100k and 120k gains in your calc, so if nothing changes then you'll have minimal CGT.

However if you're planning on selling upon your return, why not sell now? You can't guarantee the tenants will leave per your timeframe so you'll likely have to find other accommodation until they are evicted, and if you don't plan on staying long, why not just sell now.

The rental income and any property value increase you hope for is just a return on the value of the house invested. You can make a return in many other investments which aren't as demanding particularly as you won't be in the country to manage it. Most of the profit comes from
* self managing rather than paying a premium to agents
* not being exposed to mistakes by the people you put in charge eg if they fail to check tenants, protect deposits, don't deduct for necessary repairs..
* reaping the benefits of start up costs for many years, not just 2yrs..

Sell and invest elsewhere.

rae500

Hi

I've been looking into a possible job opportunity abroad and as such have been considering what to do with my home and the various CGT (and other) implications because of this.

When I've looked at the gov.uk CGT pages it suggests that private residential relief is not affected for certain periods of absence (including up to 3 years away for any reason) if you move back into your home after the period of absence.

Apologies if I'm missing something, but if julian30 was planning to move back into their home once they returned from travelling wouldn't this rule apply?