Changes to CGT When Selling a Previous Residential Property

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    Changes to CGT When Selling a Previous Residential Property

    Hi

    I think I heard there are changes being made to Private Residential Relief, as in that it is being completely removed?

    If I lived in my property for 20 years, then let it out for 2 years, am I due to pay CGT on 2 of the 22 years (ie, the gain over 22 years, divided by 22 and multiplied by 2). Or is there a way that the CGT can be calculated from the time it has been rented out? The property has actually decreased in value since letting out.

    Grateful for clarifications on new rules.

    Many thanks
    Claymore.

    #2
    The capital gain achieved by the property during " owner occupation " is exempt for cgt.

    Using your example , taking the total period of ownership at 22 years, the total period for owner occupation is currently counted as 20 years stay + 18 months after moving out.
    But after 6 April 2020, the 18 months period reduces to 9 months. Also the lettings relief can only be claimed if the owner was living with a lodger.

    So you would be charged tax on capital gain only for the rental period = 1 year + 3 months .

    Comment


      #3
      Thank you.

      Comment


        #4
        To clarify the above further - it is not how much increase there has been over 2 years -- but the TOTAL increase in price over 22 years x 2/22 (just using 1 year for easier calculation). So if the price increased (over the 22 years) by more than 22/2 x the CGT allowance you would pay tax (an increase of maybe less than about £130K in price over 22 years you would escape tax) -- there are various other adjustments like legal costs. Lettings relief will be gone.

        But you should sell fast - 2 years have passed and the tax is rapidly going to start biting ..... so after another 2 years you will pay tax if the price has increased by about £66 K since you bought it 22 years ago. That number is going change every month you wait.

        It is TOTALLY irrelevant that the price has decreased since you first let it out -- that does not help you much at all (apart from reducing the absolute gain a bit). Understand that or be burned....

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