Capital Gains Tax Let to Buy

Travel_Time

I currently own one flat in which I live. I'd like to buy a house. I'm considering letting the flat rather than selling it. Both properties will probably be sold at some point in the future to emigrate. My reading of the rules is that CGT on the flat would be a proportion of the time I have owned it. For example, if I have owned it for 10 years and then let it for 5 before selling it, then the tax would be calculated on 33% of the gain less any relief that might apply. Does that should right? I assume they would not calculate it on the whole time including the time it was my home?

[Deleted User]

On that calculation, in months, you work out the gain. 60 of the 180 months qualify for relief plus 9 months as it was your main residence at some point - so 69/180 is the relevant fraction.

tacpot12

While it is your home and for the last 9 months, you don't pay CGT on the gain. The relavant link is Tax when you sell your home: If you let out your home - GOV.UK (www.gov.uk)

You have to pay the CGT within 30 days of the sale, and you can deduce the cost of sale and the cost of puchase along with a few related costs. Be careful though as the rules are very tight about what costs can be deducted. It pays to keep a record (and receipts) for all the costs, and have these handy so you can may the payment on time.

Jeremy535897

On that calculation, in months, you work out the gain. 60 of the 180 months qualify for relief plus 9 months as it was your main residence at some point - so 69/180 is the relevant fraction.

I thought it meant ten years main residence, 5 years let, so the exempt part would be 129/180?

You have to pay the CGT within 30 days of the sale, and you can deduct the cost of sale and the cost of purchase along with a few related costs. Be careful though as the rules are very tight about what costs can be deducted. It pays to keep a record (and receipts) for all the costs, and have these handy so you can may the payment on time.

Now 60 days from completion (sales on or after 27 October 2021).

https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

pjcox2005

I know it's not the question but could you get into a situation where you pay the additional 3% stamp duty and not reclaim it depending on the timing of selling the flat and emigrating. Particularly given you reference 5 year holding whilst not living there.

May be significant depending on the return you are expecting from renting.

Travel_Time

pjcox2005 said:

I know it's not the question but could you get into a situation where you pay the additional 3% stamp duty and not reclaim it depending on the timing of selling the flat and emigrating. Particularly given you reference 5 year holding whilst not living there.

May be significant depending on the return you are expecting from renting.

I think what you're asking is am I mindful of the fact that I might be due a refund of the extra stamp duty if I sell it before three years is up? If so, yes. (assuming that is in fact the rules regarding stamp duty)

Travel_Time

Jeremy535897 said:

On that calculation, in months, you work out the gain. 60 of the 180 months qualify for relief plus 9 months as it was your main residence at some point - so 69/180 is the relevant fraction.

I thought it meant ten years main residence, 5 years let, so the exempt part would be 129/180?

You have to pay the CGT within 30 days of the sale, and you can deduct the cost of sale and the cost of purchase along with a few related costs. Be careful though as the rules are very tight about what costs can be deducted. It pays to keep a record (and receipts) for all the costs, and have these handy so you can may the payment on time.

Now 60 days from completion (sales on or after 27 October 2021).

Yes,indeed. 10 years main residence followed by 5 years let (or perhaps 3 if that enables a stamp duty refund). But lets assume 10 and 5. So the fraction is 10 years (plus 9 months) divided by 15 years right? If that is the case, it sounds like you're saying if there was a £100k increase in value, then tax is due on £28,400?

Jeremy535897

Yes, but you would have your annual exemption of £12,300 to set against it, if not used elsewhere.

Travel_Time

This is very helpful, thanks