CGT on (future) past private residence?

Avro1995

Hi there, 

I have a question regarding capital gains tax on behalf of a good friend. She currently owns and lives in her own property (mortgaged). She is currently considering moving into her partners home and either selling her house or renting it out. If she decides to rent it out (she is aware of the income tax to be paid on this) how is the future CGT payable - if at all? Will she pay CGT on the property even though it has been her main and only home in the UK since 2018 - for reference she is a Turkish national with dual UK/Turkish citizenship.

Is there some sort of relief for this? If so how is worked out and does it make a difference f she is not on the deeds to the new house (her partners) or something else? Any help appreciated just so she knows where she stands as the current rules state.

eskbanker

It's Private Residence Relief that applies - when eventually sold, the CGT liability will be reduced to reflect the period of time during which it was her home:

https://www.gov.uk/tax-sell-home

Bookworm105

as above it is simple maths to arrive at the PRR. It needs 3 dates and the monetary value to work them out

1. Total length of ownership period ie: date of sale - original purchase date (in months or days) 
2. Period in which it was the main home (ie purchase date to date moved out in months or days) plus the "final" 9 months of ownership (assuming those 9 months do not overlap/include her living in the property during those 9 months)
3. (net) monetary gain: Selling price less selling costs (legal and EA fees) less original purchase cost (in 2018?) less purchase fees (eg SDLT and legal fees)

as an example,

• purchased in Jan 2018
• sold in Dec 2026 
• moved into partner's house Dec 24
• suppose the net monetary gain is £100,000

1. total ownership = 108 months 
2. PRR period: Jan 18 - Dec 24 = 84 months + final 9 = 93 months 
3. gain £100,000

PRR therefore 100,000 x 93/108 = £86,111
Taxable value 100,000 - 86,111 = £13,889

Tax owed: taxable value less CGT allowance (currently 3,000): 13,889-3,000 = 10,889
So in this simple example she would end up with a tax bill based on net taxable gain £10,889 payable at either 18% and /or  24% depending on her actual tax bracket (I won't go into those bracket details at this stage)