CGT question

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    CGT question

    Hi -apologies for the simple question.

    I am currently renting but thinking about buying a house in a mortgage in my sole name with a view to it becoming a rental investment. I would like to mitigate any future CGT bill and I'm unclear of how this can be achieved. My questions are:

    * If I live in this 'new' house as my main residence for a period, does this reduce my CGT bill - and if it does, how long do I have to live in the house for this to come into effect?

    * Is my understanding correct regarding the '36 month rule' - i.e. I have a 3 year window after leaving the property as my main residence for it to be exempt from CGT?

    * I understand that any CGT bill will be linked to my income tax band rate. I am currently a higher rate tax payer. If, at some point in the future, I am no longer working, will this reduce my CGT bill? Am I be able to off-set against my partners allowance?


    Thanks for your help.

    #2
    If you want your partner's CGT allowance to be taken into acount then you need to change "I" to "we".

    Living in it for at least a year or two will quite substantially reduce your exposure to CGT, but this has to be a genuine occupation of the house. The gain depends on a number of factors, and therefore the 'how long do I have to live in the house for' query answer is, depends.

    Also, you'll need to consider the types of mortgages you have, as they will be different when living in compared to renting. This can mean upfront cost.

    How long are you looking to rent this investment for? If it's short, then you may just opt to buy a BTL straight out without thinking of a tax avoidance strategy.
    I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.

    That also means I cannot share in any profits from any decisions made!

    Comment


      #3
      As your stated intention is to buy the property as a rental investment rather than as your residence then arguably it can never become your PPR. Given that, I'd suggest you really should live there for at least two years in order for it to qualify. Once it qualifies then the final three years qualify too [i.e. if you sell within three years of moving out it's tax free], and also you get an extra 40k-worth of gain tax free ["letting relief"]. If you move back within less than three years of moving out (whilst not owning anywhere else) then it is as if you never left. You also get 10k annual allowance tax free.

      If you jointly own this with your partner then you both get 40k allowances and both get 10k allowances.

      Yes, if at some point you are not working and have no other income then your first 40k of capital gain is taxed at 18% the balance at 28%.

      Comment

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