Capital gains tax on having lodgers

00ec25

there are some respondents above who should not answer tax questions when it is apparent they know nothing about tax

OP, correct, if you have more than one lodger you lose your right to Private residence relief on the whole of the property
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64702

instead you become liable to CGT on the part that is let

the CGT rules are going to change in April 2020 so there really is no point giving you an answer based on today's rules as Letting relief (ie TCGA92/S223) is removed from that date

therefore you will be liable to CGT based on the % of the property let

there is no official formula for that calculation, you are supposed to use a "reasonable" method. Typically that means
either: number of rooms let
or square meters

the rooms method allows you to ignore bathrooms and toilets (and corridors, halls etc obviously)
for example: 2 lodgers, 3 bedroom house with lounge and kitchen = 5 rooms of which 2/5 or 40% is let

suppose you purchased for 100k and sold for 200k your taxable gain would be (200 - 100) = 100 x 40% = £40,000 - 11,700 CGT allowance = 28,300

with the income levels you mention in the OP, part of that would be taxed at 18% and part at 28%

00ec25

JGB1955 wrote: »

But you’re not making a capital gain from your lodgers.... are you?

yes, he is , OP is running a lodgings business and therefore is operating a commercial property activity not simply owning their only/main (tax free) home

ToasterScheme wrote: »

^^This. no, not that at all

In 10 years time, the property will not have gone up in value BECAUSE you had lodgers in it. [It might do anyway, but only in the same way as it would do if you lived in it yourself] agreed, but irrelevant to the question

Unless maybe you're planning to sell it with the lodgers installed in some way? irrelevant

You pay income tax on lodger income. It's "Income from property" yes, so a different page on the self-assessment form - but never capital gains. yes, actually, always capital gains

as above

greenbee wrote: »

I had this problem when I sold a house about 20 years ago. Interestingly, my accountant gave me very high figures, but when I talked it through with the tax office they gave me help with the calculations based on the percentage of the house occupied by lodgers over time (it had varied) and I ended up paying no CGT as we'd gradually reduced the number of lodgers and prior to selling I'd lived there on my own for long enough that it wasn't a problem.

I suspect you may have given different info to the accountant and to HMRC as this is bread and butter work for an accountant.

letting relief covered a large part of the lodger gain, private residence relief obviously covers your own occupation and the final 36 months rule (as it was then) plus the cgt allowance probably absorbed any remaining taxable gain

BUT those rules don't now apply in OP's context

ViolaLass

collectors wrote: »

avoid giving to any tax person that doesn't posses a birth certificate any of my hard earned money that i don't have to.

This is a curious prerequisite for paying tax.