Preparing for CGT

20122013

I have accepted an offer on my Buy To Let (BTL) (freehold) and should exchange at the end of the month. So I know what information  is require for Capital Gain Tax (CGT) reporting, I am preparing now as I have to pay within 60 days of completion. I have some questions:

1. Can I claim I have made a loss eg the allowable expenses are more than my rental income?)  if so, how and when do I need to make this claim by? is it before I report my CGT?

2. Do I have to tell HMRC I have stopped letting ? 

3. Do I need to 'ensure I have documented estimates for MARKET value of the place before I stopped renting'? or can it be from when I decided to sell?

4.  From reading other posts (tax related), is there anything else CGT / HMRC related before I even report my CGT, please? 

theartfullodger

General point - you don't know what the rules & regulations will be when you sell - you are probably right, but the country needs more tax income now.  Beware!

1.  Afaik irrelevant to CGT.

2. Would seem sensible. Make sure you file all records in case they investigate later (both income tax & CGT, only 2 of the more that 10 taxes a landlord may pay.)

3. dunno

4. Buy and read a book on property tax - will liely save you time and money over the alternative (more ignorance) - e.g.
https://www.amazon.co.uk/How-Save-Property-Tax-2024/dp/1911020994

(shame you didn't earlier..)

Any other capital gains/losses?? (eg shares..)

Best regards

20122013

theartfullodger said:

General point - you don't know what the rules & regulations will be when you sell - you are probably right, but the country needs more tax income now.  Beware!

4. Buy and read a book on property tax - will liely save you time and money over the alternative (more ignorance) - e.g.
https://www.amazon.co.uk/How-Save-Property-Tax-2024/dp/1911020994

I have the Bayley book but do not have the answer to my question.

theartfullodger said:

Any other capital gains/losses?? (eg shares..)

No other gains / losses  - would loss in rental income count? but is not CGT, so I am thinking 'no'

saajan_12

20122013 said:

I have accepted an offer on my Buy To Let (BTL) (freehold) and should exchange at the end of the month. So I know what information  is require for Capital Gain Tax (CGT) reporting, I am preparing now as I have to pay within 60 days of completion. I have some questions:

1. Can I claim I have made a loss eg the allowable expenses are more than my rental income?)  if so, how and when do I need to make this claim by? is it before I report my CGT?

No, income is different to capital gain/loss. You can deduct buying/selling costs and capital enhancements, but not costs relating to the rental income or routine maintenance. 

20122013 said:

2. Do I have to tell HMRC I have stopped letting ? 

No, there's no letting 'status' they hold for you. You just report the rental income when its there in your self assessment and don't went its not coming in. 

20122013 said:

3. Do I need to 'ensure I have documented estimates for MARKET value of the place before I stopped renting'? or can it be from when I decided to sell?

No, CGT is based on the value when you buy and when you sell. If you're selling to a 3rd party, then the sale price is assumed to be the value. It doesn't matter whether the property was left empty or rented. The only caveat is if you ever lived there as your main residence, the % of time is taken into account, but the interim market values isn't. 

20122013 said:

4.  From reading other posts (tax related), is there anything else CGT / HMRC related before I even report my CGT, please? 

You need to calcuate it based on other capital gains / losses you made that tax year relative to the annual allowance. Then the tax rate is based on other income you had. 

sheramber

You should be reporting your rental income less your allowable expenses each year, on your self assessment tax return, unless your gross rental income is less than £1000

Rental income and expenses are not part of CGT. 

mta999

For Capital Gains you take the price you paid and the price you sell it for and subtract the two  - this is your gross gain

From this you can deduct allowable things such as buying and selling costs (for example solicitor csts, estate agent's fees and stamp duty) and also any 'improvements' but make sure you understand what improvements are allowed. For example, decorating wouldn't be.

This produces your net gain which is taxable. I believe there is a 3,000 pound allowance per year you can deduct from this.

20122013

saajan_12 said:

20122013 said:

3. Do I need to 'ensure I have documented estimates for MARKET value of the place before I stopped renting'? or can it be from when I decided to sell?

No, CGT is based on the value when you buy and when you sell. If you're selling to a 3rd party, then the sale price is assumed to be the value. It doesn't matter whether the property was left empty or rented. The only caveat is if you ever lived there as your main residence, the % of time is taken into account, but the interim market values isn't. 

Regarding the 'What is the 9 month rule for PRR?

The final 9 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.  6 Apr 2025'

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2025

May I check that I would not qualify for this as it has not been my only or main residence at any point?

saajan_12

20122013 said:

saajan_12 said:

20122013 said:

3. Do I need to 'ensure I have documented estimates for MARKET value of the place before I stopped renting'? or can it be from when I decided to sell?

No, CGT is based on the value when you buy and when you sell. If you're selling to a 3rd party, then the sale price is assumed to be the value. It doesn't matter whether the property was left empty or rented. The only caveat is if you ever lived there as your main residence, the % of time is taken into account, but the interim market values isn't. 

Regarding the 'What is the 9 month rule for PRR?

The final 9 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.  6 Apr 2025'

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2025

May I check that I would not qualify for this as it has not been my only or main residence at any point?

Correct, the 9 months rule only applies if you .lived there as your main residence.

[Rationale is something like this: if you lived there the whole time, but it took a few months to sell then those final months aren't charged  regardless of if you already moved out. Now consider if the property was let for part of the time, you still get that same 9 month buffer as it would be harsh to remove it just because you sequenced it differently. However it it was always a rental, then that's chargeable]