Is Capital Gains Tax due on a property I've occupied?

Prinbananahamm0ck · 19 February at 2:36PM

Hi all,

I'm brand new to property letting and all the tax complications that go with it.

I bought a property in 2019 and lived in it until summer 2025. I then relocated for work and am currently renting until I decide where I want to buy.

Meanwhile I'm renting out the property I own. Firstly, I'm struggling to work out how much tax I'll be liable to pay on the rental income - is the £1,000 allowance on all income from the first pound or from the interest above the mortgage payment I'm covering? Can I deduct any of the mortgage from tax?

Secondly, I intend to sell the property and buy another one in the new location. Ideally in the next 2 years, so when I come to sell how do I work out whether I'm liable to pay CGT?

Let's say I sell exactly 2 years from moving out, I will have lived in the property for 6 years and 3 months and been renting it out for 24 months.

Gov.uk advice seems to assume knowledge of a lot of terms that I don't understand and I can't work out if I'd be eligible for any relief or not so any advice is much appreciated.

Thanks!

YellowCarBlueCar · 19 February at 3:12PM

I'm not sure on the rental income, but can answer on the CGT.

Basically you do not need to pay CGT on the time that you lived in the property as your main residence, plus 9 months.

So say you owned the property for 10 years in total, and lived in it for 8 years and 3 months, then you don't need to pay CGT for 9 of the 10 years (the 8.25 that you lived there, plus the extra .75 of a year).

If the property increased in value by £105K in those 10 years, and you incurred costs of £5K in buying and selling it (surveys, conveyancing, estate agent fees etc.) then you gain will be 100K, so you will be exempt from 9/10 of that £100K (=£90K), leaving £10K of taxable capital gain.

GrumpyDil · 19 February at 4:07PM

You will need to complete a tax assessment for the tax year 2025/2026 so need to make sure you keep a copy of all your costs involved in the letting, such as gas safety check, electrical checks etc (assume you have looked into all the requirements to let a property out).

If your total costs are less than £1000 then you can claim the trading allowance. However claiming the trading allowance means you will not be able to claim property finance costs. NB property finance costs are not claimed as a deduction but as an allowance against your taxable profit. If you are a 20% taxpayer that is ok but if you are a higher or additional rate taxpayer that can end up making what would have been profitable into a loss.

Also note you include interest and not capital payments in your return.

As an aside I assume you have been keeping abreast of the new rules abolishing S21 and extending the notice period where you give notice to move in or sell a property.

poseidon1 · 19 February at 5:07PM

No one here is going to give a full and definitive run down of everything you need to know and do to deal with your self assessment tax obligations ( far to much detail involved ).

Your first port of call on rental income tax should have been HMRC guidance below-

https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

Generally, all new landlords should invest in membership of NRLA, who provide practical and technical guidance on all issues affecting landlords at different levels ( the fee is tax deductible)

https://www.nrla.org.uk/

Finally if you find the task of doing your first rental tax return daunting ( you will also have to self assess all other income sources including Paye, bank interest etc), you could get an Accountant to do it, with a good part of that professional fee also tax deductible.