Selling main residence after letting out. CGT?

slpj

I have owned my house for a total 28 years. I rented it out for 30 months, 10 years ago, and have been living there again since.

As I understand it, I am allowed 3 years to rent it out, before I am liable to CGT if I sell it.

Does anyone know the full details of this?

Does the 3 year clock get reset if you live in the property for a minimum period again after letting it out?

What happens if you let it out for longer than 3 years? How much of the gain is then liable to CGT?

slpj

Seems I'm not the only one who doesn't know the answers then.  😒

Angela_D_3

Phone up hmrc,  they are brilliant.  Mine was complicated but owned for 13 years,  rented out for 7 nothing to pay.  

AdrianC

The taper period is nine months currently.

You have owned for 28 years = 336 months.
You were non-resident for 30 months - 9 months = 21 months.
CGT will be levied on 21/336ths of the increase in value = 6.25%, so a £250k gain would be seen as a £15,625 gain.
Assuming you hadn't used your £12,300 allowance, that would be a £3,325 taxable gain, so £931 tax bill at 28% assuming you're a standard-rate taxpayer.

slpj

OK thanks both. I've been doing some more reading and trying to get my head around it.

Angela_D_3, that sounds good, I let for less than you, so I wonder if I owe nothing too. I'll contact hmrc as you suggest.

AdrianC, OK thanks very much for explaining how to calculate it. That's really helpful.

I just did a bit of research and see that the 3 years period I assumed, was reduced to 18 months back in 2014, and has since been reduced further to the 9 months you quote. I was careful not to exceed the 3 year period. It seems a bit unfair that the reduction in taper is retrospective. But that's life I guess.

Anyway, from my reading I think as a basic rate tax payer, my CGT rate would be only 18% on property. -- At least according to "Which" ---

"How much you pay will depend on the asset you've made a profit on and your tax band.

Tax bracket                     CGT rate on assets            CGT rate on property

Basic rate tax payer                  10%                                      18%"

Aso, it appears that I can add my wife to the title before we sell, at no cost other than conveyancing, and use her GCT allownance too. Which would appear worth it, because the gain from the sale is going to be a significant amount.

I'll have to do some more reading. but if anyone has any more help and advice, it will be much appreciated.

AdrianC

slpj said:

It seems a bit unfair that the reduction in taper is retrospective. But that's life I guess.

It isn't retrospective. The applicable taper is the one in force at the time of sale. Always has been.

Retrospective would be expecting a 7yo rate to apply now.

Sorry, you're right about 18% rather than 28% - that's the higher-rate taxpayer rate.
https://www.gov.uk/capital-gains-tax/rates - horse's mouth. So that quarter-million quid gain would be just under £600 tax.

p00hsticks

Aso, it appears that I can add my wife to the title before we sell, at no cost other than conveyancing, and use her GCT allownance too. Which would appear worth it, because the gain from the sale is going to be a significant amount.

I'm not an expert, so may be wrong, but I think I've read that you need to be  bit careful about doing that if the sale is already in progress, as HMRC would consider that the only reason for the transfer is to avoid CGT and that is frowned on....

SDLT_Geek

And there was me, thinking the 9 month period of "deemed occupation" was available in respect of the last period of ownership, not a period in the middle of the ownership.

[Deleted User]

Another thing to note is the “gain” is added onto your income for that year. 

So if that added on takes you over the income tax higher rate, some of the gain is at 18% and some at 28% - there are working calculators you can google 
also remember Expenses come off the value of the gain ie buying and selling and stamp duty etc and Any improvements
There are handy lists to remind you all you can deduct 

slpj

OK thanks all.

Sale will be in the next year or two.

I hadn't thought about the point on other income. My wife's income with mine, if I transferred the house to joint names, -- I suppose that could be a problem then. I'll have to check that.

When I rented it out, I went abroad for 30 months -- just touring, not working. But had to pay hmrc tax, so I assume they would know anyway. But 600 quid isn't much to pay anyway.

Thanks again.

[Deleted User]

Mickey666 said:

slpj said:

Seems I'm not the only one who doesn't know the answers then.  😒

There's always the government of course
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet

Not to mention the hundreds if not thousands of CGT threads already on the forum. 😁