My second home was previously my first home is now for sale. Is CGT due if no profit is made.

bluearco_92

Fifteen years ago my flat, which was my main home was for sale for £100k. I purchased a second home with my partner which became my main home. The flat sale fell through and it has been rented out since. The flat is for sale again at £100k which was the same price it was when it was my main home. I have the estate agent sale documents from 15 years ago . I originally purchased the flat for £14k , 35 years ago. If no profit is made on the sale from when it was my main home would I be exempt from paying capital gains tax?

theartfullodger

Sadly think because you purchased for £14k that's the price that kicks the process off , back 35 years.  But not sure, hopefully someone cleverer than me along shortly..

(I sold a house last year I bought for £18.5k in 2000: Also largely rented out.  That price was the starting point for CGT calculations....)

The country (i.e. us lot) needs the tax income... Do you have relevant paperwork (invoices for capital improvements, legal costs etc etc ) going back 35 years??

macman

No, you are not 'exempt'. There is a potential liability and you need to do the calculation. The total months of ownership, minus the months occupied by you, minus 9 months, form the basis of the liability. 
The increase in value is assumed to be linear, on a monthly basis.

silvercar

As others have said, you have a gain. All calculations should be in months, but roughly speaking you have say 80k of gain (after allowing for buying and selling costs). 14.25/35 is taxable so a gain of roughly 32.5k less the CGT allowance at time of sale, charged at the CGT rates depending on your income.

_Penny_Dreadful

bluearco_92 said:

Fifteen years ago my flat, which was my main home was for sale for £100k. I purchased a second home with my partner which became my main home. The flat sale fell through and it has been rented out since. The flat is for sale again at £100k which was the same price it was when it was my main home. I have the estate agent sale documents from 15 years ago . I originally purchased the flat for £14k , 35 years ago. If no profit is made on the sale from when it was my main home would I be exempt from paying capital gains tax?

The capital gain is based on the gain over the whole period of ownership, not from when you started letting the property.

Your gain is £100,000 - £14,000 = £86,000

It sounds like you lived in the flat as your principle residence for the first 20 years so you will get 240 months of Principle Residence Relief (PPR) plus the final 9 months of ownership giving you 249 months of PPR out of a total of 420 months of ownership.

PPR = £86000 x 249/420 = £50,985.71

You get a £3,000 CGT personal allowance in the 2024/25 tax year

Therefore, your net taxable gain is £86,000 - £50,985.71 - £3,000 = £32,014.29

You could try and bring your net gain down if you have capital costs you could apply.

Then, depending on your income for the 2024/25 tax year, you would pay 18% or 28% or a mixture of the two on your net capital gain.

Bookworm105

when working out the "gross" gain (86,000 in penny-dreadful's example above) you can deduct some costs as part of the calculation meaning the gain would be a tad lower for the rest of the calculation:

- legal fees on purchase (assuming you have evidence of them from 35 years ago!)
- legal fees on sale
- estate agent fees on sale 

Tax when you sell property: Work out your gain - GOV.UK (www.gov.uk)


since you mention a partner, the other key fact to be clear on is who is the current owner of the property?
- if it is still in your sole name then fine, carry on as above.
- if your partner is now a co-owner, then the situation is very different

GDB2222

Important question: are you married?

propertyrental

GDB2222 said:

Important question: are you married?

No - GDB2222 is not after a date. Unmarried partners are taxed differently to married partners.

bluearco_92

Thank you all for the replies.
In my logic I thought that if I had sold the flat 15 years ago for £100k when it was my main home I would not have paid any capital gains tax becuase it was my main home. Is this correct ?
I am now selling it 15 years later at the same price so there has been no taxable gain on the amount I would have received when it was sold as my main home. So if there is no gain in the property value from when it was my main home then I was thinking there would be no capital gain tax to pay ?
The propoerty is in my sole name.
Your feedback would be very much appreciated.

_Penny_Dreadful

bluearco_92 said:

Thank you all for the replies.
In my logic I thought that if I had sold the flat 15 years ago for £100k when it was my main home I would not have paid any capital gains tax becuase it was my main home. Is this correct ?
I am now selling it 15 years later at the same price so there has been no taxable gain on the amount I would have received when it was sold as my main home. So if there is no gain in the property value from when it was my main home then I was thinking there would be no capital gain tax to pay ?
The propoerty is in my sole name.
Your feedback would be very much appreciated.

If you had sold the flat 15 years ago then that's correct, you would have had zero CGT to pay as you would have had PPR for the full time of ownership.

Gross gain = £100,000 - £14,000 = £86,000

PPR = £86000 x 240/240 = £86,000

Net gain = £86,000 - £86,000 = 0

However, you did not sell the flat 15 years, you are selling it now, so what you might have been able to sell the flat for 15 years ago is irrelevant.  There is a gain of £86,000 from when you bought the flat and you are not entitled to the full 420 months of PPR because for the past 15 years it has not been your only or main residence.

Bookworm105

bluearco_92 said:

Thank you all for the replies.
In my logic I thought that if I had sold the flat 15 years ago for £100k when it was my main home I would not have paid any capital gains tax becuase it was my main home. Is this correct ?
I am now selling it 15 years later at the same price so there has been no taxable gain on the amount I would have received when it was sold as my main home. So if there is no gain in the property value from when it was my main home then I was thinking there would be no capital gain tax to pay ?
The propoerty is in my sole name.
Your feedback would be very much appreciated.

what feedback? Tax is based on what the law says it is based on. Learn those facts rather than think what you would like it to be, your "logic" is irrelevant, 

CGT is based on the entire period of ownership, not price expectations (unproven "valuations")  between between two arbitrary dates during that ownership. Tax prefers to use hard facts when it can. For property that is a) what was paid to buy it, and b) what did it ACTUALLY sell for.
That is the gain in real money, not paper valuations or my anticipated sales price when I failed to sell it to someone else.

Exemption (or more technically "relief") from CGT is given only to a property whilst it is in use as your main home. If it stops being that, then for the period it isn't, it is liable. Fact. The implication of that and how to calculate the relief you will get for when it was the main home have already been explained.