CGT on future sale of previous home

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  • CGT on future sale of previous home

    Your advice please.

    My home is mortgage free and am looking to purchase another house to move into, taking some of the equity from current home as deposit for new home. Current home was purchased in Jan 2001.

    Question
    1. When the 1st house is eventually sold, is the CGT based from the Jan 2001 purchase transaction value or the value when we purchased the new home and let the current house?
    2. Is there a time restriction as to when the Let to Buy property should be sold to minimize CGT?
    3. How is the CGT calculated, the purchase price in 2001 was 200K, now it valued at 480K

    Thanks in advance

  • #2
    The CGT is apportioned.

    So the gain would be the difference between the sale value and the purchase price.
    The taxable gain is the entire gain times (the number of days when the property wasn't your main residence plus 18 months) divided by the number of days you owned it.

    So if you owned it for ten years and lived in it for four and a half with £100k gain, your taxable gain is £100k * (1460 [10 years less 4.5 + 1.5 years)] / 3650 [10 years].

    So £40k is taxable.
    And obviously that's a back of a fag packet version.

    So if you sell within 18 months there's no tax at all.

    You are also entitled to letting relief which will reduce the bill further.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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    • #3
      If your house has been owner-occupied since Jan 2001 and you move out at end of month , the entire period plus 18 months from moving out ( up to May 2019 ) is exempt for capital gains tax . You have capital gains over 18 years period of £280K ( £480 less £200K ) and this is fully exempt for cgt.

      If you rent out the property and sold in Jan 2025 and achieved 360K in capital gains over 24 years period , then approx one quarter of the capital gains = £90K is liable for cgt. but you can deduct lettings relief up to £40K + personal cgt allowance £11K .

      So you would pay tax on the chargeable capital gains : £90K- £40K -£11K =£39K @ 28% = £11K tax bill.

      But you should consult a tax accountant before you decide as the calculation given here in a forum may not be correct.

      Comment


      • #4
        If you can kindly give us the CGT rules and regulations for when you will sell an accurate answer may be tried. Otherwise, guesses.
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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        • #5
          Yes, after Brexit negotiations have been concluded in 2019 , the tax rules may be changed. So yes , I am guessing .

          Comment


          • #6
            Sorry, not aiming at anyone in particular: Rules could change with the Budget 22nd November.

            I admire your confidence with your 2019 prediction for conclusion of negotiations!
            I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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