Owned for 12yrs. (first 7 as occupier too): how much CGT?

[phil.knowles]

I bought a house 12 years ago and lived in it for 7 years. its being let for 5 years.

It cost 18,500 and is now valued at 85,000.
can you tell me roughly how much Capital Gains i will have to pay ??
Thankyou Phil Knowles

[Tax Accountant]

I bought a house 12 years ago and lived in it for 7 years. its being let for 5 years.

It cost 18,500 and is now valued at 85,000.
can you tell me roughly how much Capital Gains i will have to pay ??
Thankyou Phil Knowles

I assume that the 7 years lived in refers to having used it as your only or main residence. If so, the gains time-apportioned to 7 years + final 3 years = 10 years are exempted under the PPR relief. The gains time-apportioned to the remaining 2 years, approximately £10,000, is more than covered by lettings relief alone, even before taking account of taper relief and annual exemption.

Assume that you carry on letting for another 5 years (making a total ownership period of 17 years), and the value at that time is £150,000.

10 years will still be exempt as before. The gains time-apportioned to the other 7 years will be approximately £50,000. This will be fully covered by lettings relief of £40,000, taper relief of £4,000 and the annual exemption.

Therefore, you can continue letting for a good few more years without worrying about CGT.

I hope this helps.

Ramnik

[phil.knowles]

Thankyou for the reply big help
Regards phil

[Tax Accountant]

Thankyou for the reply big help
Regards phil

You are welcome.

Ramnik

[mharie]

Similar question from new member - How much CGT?

You are welcome.

Ramnik

Using the basis you laid out for the previous request I did the same for my situation. Does it look correct? Other complicating details are added.

Joint owner property (with spouse) bought in 1993 for 105k. Now estimated value 280k.
Kept as main principle residence and occupied for five years till 1998. Since then has been rented (occupied, or empty but on the market for rent) to date.
We have been NR for tax since '98 till present, but pay tax on rental income.

(We have also bought another property for an investment but this is currently empty and not on the rental market yet, it could even be our primary residence when we return to the UK in a few (2 - 3) years)

I am thinking of selling the first property but it's not a must and could with some advice on best way forward, especially in the realm of CGT.

If I calculate using your previous note and my very basic understanding :

Potential gain = 175k, Main residence for 5 years plus 3 = 8 years, therefore 5 years as taxable gain from 13 years of ownership.
Therefore 5 years at approx 13.45k p.a. (175/13) gives 67k gain for the 5 years.

Will letting relief cover that? (I read up to 40k per owner i.e. 80k allowable therefore no CGT).
(Another question is how can I find out the actual letting relief available in my own case?)

If the letting relief does not cover it, I would apply over 10 years Taper relief, resulting in 40k gain ( 60% of 67)?

Do I still have room to continue renting without incurring any CGC when I sell?, or would taking it off the rental market and keeping as primary residence be necessary at some point?

Thanks in advance.
Mharie

[Tax Accountant]

Using the basis you laid out for the previous request I did the same for my situation. Does it look correct? Other complicating details are added.

Joint owner property (with spouse) bought in 1993 for 105k. Now estimated value 280k.
Kept as main principle residence and occupied for five years till 1998. Since then has been rented (occupied, or empty but on the market for rent) to date.
We have been NR for tax since '98 till present, but pay tax on rental income.

If you have been a Non-Resident and Ordinarily Non-Resident for 5 complete UK tax years, and sell before you become resident again, there is no UK CGT on any assets. But you then need to consider your tax position of the country of which you are a resident.

(We have also bought another property for an investment but this is currently empty and not on the rental market yet, it could even be our primary residence when we return to the UK in a few (2 - 3) years)

I am thinking of selling the first property but it's not a must and could with some advice on best way forward, especially in the realm of CGT.

If I calculate using your previous note and my very basic understanding :

Potential gain = 175k, Main residence for 5 years plus 3 = 8 years, therefore 5 years as taxable gain from 13 years of ownership.
Therefore 5 years at approx 13.45k p.a. (175/13) gives 67k gain for the 5 years.

So far OK

Will letting relief cover that? (I read up to 40k per owner i.e. 80k allowable therefore no CGT).
(Another question is how can I find out the actual letting relief available in my own case?)

For 2 joint owners, Letting relief is the lower of £80,000, or the amount of the gain as a result of 8 years of letting(8/13 x £175,000 = £107,672), or the amount of your gains exempted due to Private residence relief (8/13 x £175,000 = £107,672) or the amount of the actual gain remaining after Private Residence Relief (£67,307).

Therefore, letting relief in your case appears to be £67,307 divided between the two of you = £33,653 each to cover the share of gains for each joint owner.

If the letting relief does not cover it, I would apply over 10 years Taper relief, resulting in 40k gain ( 60% of 67)?

Yes.

Do I still have room to continue renting without incurring any CGC when I sell?,

You need to do the number crunching now and then to see where you are with CGT. This is because all the numbers used in the calculations change with time, eg, number of years not covered bt Private Residence Relief keeps increasing, the gross gain may also keep increasing due to values going up etc. But you seem to have some room.


or would taking it off the rental market and keeping as primary residence be necessary at some point?

There is no need to take it off the rental market and there is no need to keep it as primary residence. You retain the Primary residence relief as shown above.

If you do use it as your residence again in the future, you may increase your exempt years further, provided these are outside the final 3 years ownership.

Thanks in advance.

Mharie

Please see the comments in red above.

Ramnik