Capital gains tax - help please..

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    Capital gains tax - help please..

    Hi All

    Newbie landlord here and I would really appreciate some advice on capital gains tax.

    I understand that tax is payable on the profit of a 2nd home, so x% between the sales price and the purchase price?

    I have owned and lived in my current flat for 5 years now, but in Jan 15 will have remortgaged to a BTL and rented it out, and purchased a new home with a residential mortgage.

    So although I purchased the flat in 2009, it only became a 2nd home as of Jan 2015, so if I sold the flat in another 5 years (2020), would:

    - HMRC sting me for the capital gain on the purchase price from 2009 to sales price in 2020?
    - Or just the capital gain from when it became a 2nd home in 2015 to the sales price in 2015? And if so, how would HMRC judge the value as of 2015, as surely this would be subjective?

    I really am very new to this so any advice or guidance would be greatly appreciated.

    Thanks very much

    Matt

    #2
    Why do you think HMRC will sting you ? You should buy a copy of the Daily Mail 2013-2014 tax guide or Which 2013-2014 tax guide and read up how capital gains is calculated and taxed by HMRC or you may read it in your local public library for free. You are only liable for capital gains tax on the profit after the property is sold.

    If the property was owned and rented out for all 10 years and you have 100K profit ( taxable gain ) , you would claim the 11K cgt allowance and be liable to pay tax on the balance of 89K at 18% or 28% ( depending on whether you are tax on job income at 20% or 40% ),

    If the property was lived in by you as owner for 5 years , then you would be exempt for 5 years plus a further 18 months from date of moving out.
    So if you have 100K profit over 10 years, then the gain over 6.5 years would be exempt = 65K exempt. So the calculated taxable gain is 35K but you can claim up to 40K lettings relief , so you would NOT have any tax to pay.

    So buy a tax guide.

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