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  • FIRST POST
    • DippityDooDah
    • By DippityDooDah 27th Dec 17, 3:48 PM
    • 29Posts
    • 103Thanks
    DippityDooDah
    CGT and Letting Relief
    • #1
    • 27th Dec 17, 3:48 PM
    CGT and Letting Relief 27th Dec 17 at 3:48 PM
    working out my OH self assessment and have a question regarding CGT and Letting Relied that I hope one of you good peple will know the answer to.

    House bought in 1997 from Council for 17,500, 70% discount at time so market value was 58k
    lived in as family home until 2010. Market value at this time 90k
    rented out from 2010-2017 when it was sold on 31/3/17 for 90k.
    Deductable costs 2500 (selling fees, solicitors etc)

    I have worked out that he has Private Residence Relief for 14.5 of the 20 years he owned it (13 years lived in plus 18 months allowance)

    i work out the chargable gain to be on 19,250, which is approx 3850 in tax.

    how do i know if we are eligible for Letting Relief? if he is eligible for this it would mean that there was no tax owed?

    Also, can CGT be offset against tax allowance? He has only earner 5400 in 16/17 so has not used his full tax allowance.

    any help would be very much appreciated.

    thank you in advance
    DDD x
Page 2
    • Keep pedalling
    • By Keep pedalling 18th Sep 18, 7:42 PM
    • 6,804 Posts
    • 7,955 Thanks
    Keep pedalling
    You cannot offset any of the improvements mentioned above in your calculations, unless by new bathroom you mean adding a bathroom rather than refurbishing an existing one.
    • 00ec25
    • By 00ec25 19th Sep 18, 7:29 PM
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    00ec25
    We are joint owners
    Originally posted by ritzD
    so the gain is split into your respective shares so that each person is taxed individually depending on their circumstances (ie one may be a higher rate taxpayer whilst the other isn't)

    PRR, LR and PA are claimed by each owner
    based on your figures with an assumed 100k each neither of you will have a taxable gain after all relief is applied.

    We brought our house on Nov 30th 2006 - total costs* 300,000

    *cost of house, stamp duty, legal costs, improvements (double glazing, new bathroom, damproofing so it’s sell-able, kitchen costs, new doors – hope these are all allowable?)
    Originally posted by ritzD
    none of those costs are classed as capital improvements, they are all ordinary repairs. Depending on when the work was done you could/should have claimed them on your rental profits tax return. You cannot claim them against your capital gain.

    PS where did you bring the house from? Was it expensive to move it
    • pjcox2005
    • By pjcox2005 19th Sep 18, 7:44 PM
    • 637 Posts
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    pjcox2005
    Thank you saajan_12, I don't have that information to hand I'm afraid but no I have not rented to anyone else, it has been a bolt hole for me when I needed one.... Thanks though I will try to find these matters out.
    Originally posted by sean07687


    May be too late for Sean but wouldn't he get 4 years PPR relief due to working away from home for work (even with it in the UK)?


    Also, if he were to move back in for a period then would it mean that he can use the 3 year exemption for any reason? Does that still exist?


    You'd then still have the final 18 months qualifying as well which between them could substantially reduce the gain.


    Not my area hence asking the questions just in case it's useful for anyone else stumbling across the thread.
    • 00ec25
    • By 00ec25 19th Sep 18, 9:14 PM
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    00ec25
    May be too late for Sean but wouldn't he get 4 years PPR relief due to working away from home for work (even with it in the UK)?

    "moving for work" means the employer requires you to relocate or you get sacked.

    I rather think Sean mean he chose to move to London to find better work for himself, not because he was compelled to move there by his employer

    the first makes it exempt, the second does not


    Also, if he were to move back in for a period then would it mean that he can use the 3 year exemption for any reason? Does that still exist?

    yes that exists, read HS283

    You'd then still have the final 18 months qualifying as well which between them could substantially reduce the gain.


    Not my area hence asking the questions just in case it's useful for anyone else stumbling across the thread.
    Originally posted by pjcox2005
    https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet
  • archived user
    Have been reading al the posts in this thread and was hoping someone can clarify one thing. Is PRR and LR only claimable if you have lived in a second property.?
    We own a property abroad but have never lived in it.
    • 00ec25
    • By 00ec25 24th Sep 18, 6:48 AM
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    00ec25
    Have been reading al the posts in this thread and was hoping someone can clarify one thing. Is PRR and LR only claimable if you have lived in a second property.?
    We own a property abroad but have never lived in it.
    Originally posted by Pam17
    it has nothing at all to do with how many properties you own.

    It is relief potentially available for the place you are selling, if that place (on its own) meets the conditions
    • silvercar
    • By silvercar 24th Sep 18, 8:34 AM
    • 39,282 Posts
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    silvercar
    purdyoaten2

    Could of, would of, should of...... AAAAAAAAArgh,

    Why do you post that? It's so rude.

    I asked a question and explained at the time that I know nothing of financial matters, it seems to me that this website can often be a forum for people to put down other people simply because they do not have knowledge, I thought the point of Forms was to help people, who are in need of advice, not be damn sarcastic to them, I explained I knew very little about that subject and I also asked people to be 'kind' because of this. I wanted HELP, not sarcasm...
    Originally posted by sean07687
    As a new user you may not have picked up all the quirks of this forum. The comment that you considered rude is in purdeyoaten2's signature. As such it appears at the bottom of all his posts. Consider it a general comment on people's grammar, rather than a dig at you personally.

    You have received great help on this thread, that I'm sure you appreciate. I hope you stick around.
    I'm a Board Guide on the Debate House Prices & the Economy, House Buying, Renting & Selling, Mortgages and Endowments, In My Home incl DIY, Overseas Holidays & Student boards.
    I volunteer to help get your forum questions answered and keep the forum running smoothly.
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of moneysavingexpert.com.
  • archived user
    Sorry I should explain our primary residence (house) is in the UK. We have a second property in Berlin which has only ever been rented out to tenants. We declare that rental income in the UK and Germany.
    Having never lived in the German property I was asking if I was right in assuming that neither PRR or LR would be claimable by us when completing our CGT form
    • 00ec25
    • By 00ec25 24th Sep 18, 6:27 PM
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    00ec25
    Sorry I should explain our primary residence (house) is in the UK. We have a second property in Berlin which has only ever been rented out to tenants. We declare that rental income in the UK and Germany.
    Having never lived in the German property I was asking if I was right in assuming that neither PRR or LR would be claimable by us when completing our CGT form
    Originally posted by Pam17
    that has already been answered in post #2 ...

    2. Claim Private Residence Relief (PRR) amount
    If the owner lived in the property as their only/main home they are entitled to claim PRR for that period.
    If there is no claim to PRR then you cannot claim LR.
    • ritzD
    • By ritzD 30th Sep 18, 9:17 AM
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    ritzD
    Thanks for your help guys!! haha yeh moving that house on the back of my van was costly! guess I should've said "purchased" lol

    Anyway with these costs that you've said are not capital improvements, ....these are the costs we are incurring currently. We have just moved back in to the property to do all this work eg. double glazing, Damproofing, fit new kitchen, bathroom etc...we submit our self assessment every jan, so how would we go about doing it this year if we've sold the property by the end of this year. Can we claim for these costs? Also for most part of this year we received no rent from our tenants, so we are looking into going to small claims court to get the rent arrears paid back (apparently this could take upto a year we've been told). Would this have any impact on reducing our CGT?
    • Njdp1
    • By Njdp1 26th Jan 19, 11:45 AM
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    Njdp1
    Hi, I'm trying to work out if I need to pay CGT on a property I jointly own with my wife. We bought the property in July 2013 for 327,000 and lived in the property till October 2015 when we moved to Australia. We then rented the property from November 2015 till March 2017. The property was then empty till we sold it in July 2017 for $425,000. We had no other Uk income whilst overseas.
    • silvercar
    • By silvercar 26th Jan 19, 12:06 PM
    • 39,282 Posts
    • 163,173 Thanks
    silvercar
    Hi, I'm trying to work out if I need to pay CGT on a property I jointly own with my wife. We bought the property in July 2013 for 327,000 and lived in the property till October 2015 when we moved to Australia. We then rented the property from November 2015 till March 2017. The property was then empty till we sold it in July 2017 for $425,000. We had no other Uk income whilst overseas.
    Originally posted by Njdp1
    Assuming you mean 425k not $425k.

    You each have a gain of 49k. Lets also assume buying and selling costs of 2k.

    owned it for 48 months, PPR for 27 months. last 18 months also allowed so 45/48 of 47 is exempt ie 44k is exempt and the remaining 3k would be within your CGT allowance. (Plus you have letting relief you could claim if you needed it.)

    Worth also checking Australian tax rules, to see if they impose a tax on worldwide capital gains and what that may be.
    • 00ec25
    • By 00ec25 26th Jan 19, 4:43 PM
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    00ec25
    l we sold it in July 2017 for $425,000. We had no other Uk income whilst overseas.
    Originally posted by Njdp1


    so have you met the 30 day deadline for notifying HMRC that as non residents you have sold a residential property?
    https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property

    you will get a late filing penalty whether there is CGT to pay or not, unless you have the right to include it on 17/18's tax return,
    let us hope HMRC did not spot the fact the rental business ended in 16/17 or it could get rather sticky
    Last edited by 00ec25; 26-01-2019 at 4:44 PM. Reason: proofreading after the event :)
    • Njdp1
    • By Njdp1 27th Jan 19, 5:20 AM
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    Njdp1
    Thanks for the quick reply extremely helpful.
    • Lamps08
    • By Lamps08 17th Jul 19, 11:55 AM
    • 3 Posts
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    Lamps08
    Letting Relief
    Hi all Ive read through this forum thread and found the postings to be very helpful (particularly the first post made by 00ec25).

    However there is one element that I am not fully clear on and how it applies to me in the scenario detailed below.
    Im not sure if the LR value is 11,146 or 14,861 (or something else)?

    Thanks in advance for any pointers!

    Purchase 55,750
    Stamp Duty, Legal, Fees etc 4,000
    Sale 300,000
    Owned 388 months: -
    Lived for first 346 months (PRR: 346+18 = 364 months)
    Vacant for next 6 months (zero relief)
    Let for final 36 months of ownership (LR: X months)
    Last edited by Lamps08; 17-07-2019 at 12:08 PM.
    • 00ec25
    • By 00ec25 17th Jul 19, 5:43 PM
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    00ec25
    Vacant for next 6 months (zero relief)
    Let for final 36 months of ownership (LR: X months)
    Originally posted by Lamps08
    18/388 = 11,146

    Where the rental business is letting property, the business can’t begin until the first property is let.
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505

    no matter how long you were advertising it for letting, it was not let until the tenants moved in, once they did so any subsequent voids are included in letting provided the property is actively being marketed for let whilst void. If not (eg up for sale) it is not included in the let period, but falls into the "final period" (deemed occupation period), see example 2 (the 2014 date is for reference to when the final period reduced from 36 to 18 months)

    see example 4 in your scenario of letting continuing into the "final period"
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64737
    Last edited by 00ec25; 18-07-2019 at 7:10 AM.
    • xylophone
    • By xylophone 17th Jul 19, 6:40 PM
    • 30,579 Posts
    • 18,831 Thanks
    xylophone
    Apropos of Letting Relief, this caught my eye today.

    https://www.thisismoney.co.uk/money/buytolet/article-7249209/Capital-gains-tax-rule-change-cost-accidental-landlords-thousands.html
    • 00ec25
    • By 00ec25 18th Jul 19, 6:59 AM
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    00ec25
    yes, announced Budget 2018 and consulted on in April 19 to clarify some details

    letting relief ends April 2020 hence some recent threads on here asking for calculations of before and after comparisons to inform decision when to sell

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/790479/CGT_PRR_changes_to_ancillary_reliefs.pdf
    • Lamps08
    • By Lamps08 18th Jul 19, 11:24 AM
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    Lamps08
    Thank you 00ec25 for the prompt response and explanation!

    Yes the removal of the LR from 06 April is exactly why I am reviewing this.

    It beggars belief that I struggled hard to keep the property when I separated from my partner when mortgage interest rates were 16%+ in the late eighties, through deferring part of the interest payments, adding material capital to the original mortgage loan, and taking in lodgers and a second job.

    So they stuffed me then, and when I thought Id finally got my neck above the water line they are stuffing me again!

    I now cohabitate with my new partner and the rental income is currently the main part of my pension. I provide high quality accommodation (at rent that is below market rate to help minimise any churn) to very good tenants (people!) who are not looking to move on. And now I am agonising whether to sell and start again, with the tenants losing their home in the process or take the future hit on the CGT (Ive calculated this to be c13k by 2027).

    This was announced in the November budget but followed by a consultation process that wasnt concluded until only this month - with no change from the original announcement. So how does that work for anyone impacted who signed a 12 month AST since March.

    Sob story and rant over sorry promise not to do it again!
    • 00ec25
    • By 00ec25 18th Jul 19, 6:35 PM
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    00ec25
    future hit on the CGT (I’ve calculated this to be c13k by 2027).
    Originally posted by Lamps08
    if that is the net impact of lost LR offset by 7 years of rental profit then it is a trivial value that could easily be wiped out by a few years of further capital growth.

    I thought you were looking at a total loss, ie the full 40k of LR - that would be worth further consideration but only in so far as the maximum tax you would ever have to pay (current tax rates and rules obviously) on loss of LR is 40,000 x 28% = 11,200 tax payable. For many people that is "only" a few years of rental profit...

    if your 13k refers to lost gain, then the tax is but 3,640 which, even for a pensioner, is not much.... ?
    Last edited by 00ec25; 18-07-2019 at 8:42 PM.
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