Capital gains query

Newheight13

Hi,

I’ll try and word this best I can as I find this a scenario confusing in terms of CGT.

We have lived in our only and current property for 20 months and it has increased about 50k in equity. (property A)

If we let it out now releasing 50k equity towards new residential, will we pay CGT if we sell property ‘A’ in the future? If so will CGT kick in on the increase of 50k equity made why it was a  residential, or just from the point it becomes a BTL?

Secondly, with the new residential, will we pay CGT on any increase on that property with it being our main residence but having a BTL in the back ground?

Lastly, if we don’t pay CGT on the 50k equity when coming to sell property A and only on the equity since it was a BTL, how is this value time stamped, if that makes sense? Is it based on remortgage value when raising the 50k?

Hope what I’m trying to say makes some sort of sense.  

Cheers 

badger09

Without commenting on advisability of your plan & assuming CGT rules remain the same when you come to sell..

You will be liable to pay CGT on property A for the time it was let, less the last 9 months. The gain is calculated on the whole period of ownership, not just the let period. Eg
property A
bought for £250k Sept 2021, sold for £400k Sept 2025 (48 months)
overall gain £150k
owner occupied Sept 2021 - June 2023 (21 months)
let July 2023 - Sept 2025 (27 months)

Gain is 150 x (27-9)/48 = £56250

You would not be liable to CGT on Property B if it’s your residence throughout period of ownership. 

Above is really simplified
Have a look here for the rules
https://www.gov.uk/tax-sell-property

Don't forget additional SDLT on your new home

Newheight13

Thank you so much, that’s really useful