Renting then selling - tax implications??

blimeyted

Hi all...I've had my house on the market pre-HIPS and have had three sales fall through.

I've had an offer from someone to rent the property for 6 months. They may then decide to put in an offer to buy.

That would be in October. In the meantime, would I have to take the house off the market.

I have lived in the property but have since moved out. If I rent it out I presume I'd be liable for tax on the rental income?

Also, more importantly, as a self employed person would I be liable for capital gains tax on the property when I eventually sell as it would've been rented out?

Hope you guys and gals can offer some expertise!

Icey77

You will have to pay tax on the rental income I'm afraid

As you have lived in the house it has been your PPI but there are rules on the length of time you don't live in it for CGT. Others on here are more up to speed on Principal Private Residence rules than I am the moment so they can help on that front.

TaxGeek

You will have to pay tax on the rental income, less any expenses incurred in renting out (eg agent's fees). You can also deduct the interest element of any mortgage payments in the time it is being rented (note, interest element only, not the capital repayments).

As you have lived in the house you will not have to pay CGT if you sell within 3 years of living there. After that, you may be liable to CGT (depending on the level of the gain/time of ownwership etc.)

silvercar

As taxgeek says, you would be exempt from CGT for the time it was your home and the last 3 years of ownership. You would also be eligible for letting relief and have a CGT allowance (currently 9,600); so nothing to worry about for a few years.