CGT on property advice

daveb975

I have just purchased a new flat, whilst keeping my current one, which I was planning to let out.

I have lived in the original flat for 6 years during which time the value has increased by c.£100k.

I understood that the first 3 years that a property was no longer your primary residence were not assessable for CGT, but reading some threads on this site suggest that this is not the case if you rent out the property.

Could anyone clarify?

Random_bloke_2

I think you only pay CGT on the increase in value from when it ceases to be your primary residence. So not on the 100k that it has currently gone up. Not certain though/

telly-addict

The CGT kicks in if and when you sell the property that has not been your principal private residence (PPR) for the whole period of ownership, not if you are merely letting it out. It is then the rental income net of expenses that is chargeable to income tax.

You calculate the gain during your entire period of ownership: you would include in your 'base cost' the price you paid, plus Stamp Duty, legal fees. From your sale proceeds you would deduct legal fees, estate agents fees and any other selling costs.

If you owned it before 5 APril 1998 you would have 'indexation allowance ' which is an adjustment for inflation added on to the cost too. AFter that date, taper relief applies.

You pro-rate the gain into the months when it wasn't your PPR. (E.g. total ownership 10 years, not PPR for 4 years, 4/10 * gain is chargeable.) It was your PPR when you lived there, the last 36 months of ownership and various periods if you were required to live somewhere else due to your work. If you let it, you also get 'letting relief'. All these things can reduce down the chargeable gain.

Let me know if you need any more info.