Capital Gains Tax Query on Rental Property

Jeremy535897

Mrcsmrs said:

jim_walton said:

I have probably not read this properly but if the house is their principal residence then CGT won’t be payable.  

It has been their principal residence for the last 45 years but won’t be when they move in with us and it is let to a tenant. They will eventually need to sell it, but not to buy another residence as they’re going to be living with us. 

For some reason I had thought it was okay to sell within 3 years of moving out of it but I’m not sure why or where I got that idea hence asking in here. 

You got it from the fact that 3 years was the old rule (later reduced to 18 months, then 9 months from 6 April 2020)

Mrcsmrs

Jeremy535897 said:

Mrcsmrs said:

jim_walton said:

I have probably not read this properly but if the house is their principal residence then CGT won’t be payable.  

It has been their principal residence for the last 45 years but won’t be when they move in with us and it is let to a tenant. They will eventually need to sell it, but not to buy another residence as they’re going to be living with us. 

For some reason I had thought it was okay to sell within 3 years of moving out of it but I’m not sure why or where I got that idea hence asking in here. 

You got it from the fact that 3 years was the old rule (later reduced to 18 months, then 9 months from 6 April 2020)

Thank you, I had no idea why I thought it, just had it lurking in the back there! 

Interesting though, thanks to this thread I worked out the average property increase over the time they’ve had their house and we’ve had ours and it’s a surprisingly high figure if you average it out as you said. Makes me feel a little better about paying the mortgage! 

Jeremy535897

Mrcsmrs said:

Jeremy535897 said:

Mrcsmrs said:

jim_walton said:

I have probably not read this properly but if the house is their principal residence then CGT won’t be payable.  

It has been their principal residence for the last 45 years but won’t be when they move in with us and it is let to a tenant. They will eventually need to sell it, but not to buy another residence as they’re going to be living with us. 

For some reason I had thought it was okay to sell within 3 years of moving out of it but I’m not sure why or where I got that idea hence asking in here. 

You got it from the fact that 3 years was the old rule (later reduced to 18 months, then 9 months from 6 April 2020)

Thank you, I had no idea why I thought it, just had it lurking in the back there! 

Interesting though, thanks to this thread I worked out the average property increase over the time they’ve had their house and we’ve had ours and it’s a surprisingly high figure if you average it out as you said. Makes me feel a little better about paying the mortgage! 

I don't want to disappoint you, but houses bought in 1975 show a massively bigger increase per year than properties today. My father in law paid about £15,000 for his and sold it for £450,000 recently. That is about a 3,000% increase. To equal that, the buyer would have to sell in 2065 for £13.5 million.

jim_walton

Doesn’t sound quite right to me.  If it’s the only house they own then no CGT is due. They will have to income tax on the rent they receive however.  

Jeremy535897

jim_walton said:

Doesn’t sound quite right to me.  If it’s the only house they own then no CGT is due. They will have to income tax on the rent they receive however.  

The OP is talking about a house that will cease to be a main residence and will be let out, stopping the main residence exemption. It doesn't matter if it is the only house they own. Please desist from making comments on threads when you don't have the relevant knowledge.

[Deleted User]

jim_walton said:

Doesn’t sound quite right to me.  If it’s the only house they own then no CGT is due. 

That is just incorrect. It is ENTIRELY dependent on whether one lives in the house, not how many houses one owns.

jim_walton

So will CGT be payable on the difference in value from when they bought it or from when the started to rent it?  

[Deleted User]

jim_walton said:

So will CGT be payable on the difference in value from when they bought it or from when the started to rent it?  

Neither. It will be the difference between the value at sale (less costs) and the value at 31st March 1982 (presumably higher than cost). This will be reduced by apportioning the time where it was main residence plus 9 months with the total period of ownership. 

jim_walton

Oh ok. I understand that thanks.  I’m still guessing the CGT will be very small though. After allowances. Am I at least correct in this?  

Jeremy535897

jim_walton said:

Oh ok. I understand that thanks.  I’m still guessing the CGT will be very small though. After allowances. Am I at least correct in this?  

Just read the earlier posts.