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Thanks for your question
I am afraid it would seem that none of the reliefs you ask of, are allowable.
Indexation allowance and taper relief were abolished in April 2008, so are not due for any house sales that took place after this date.
Lettings relief, will only apply if at any time this was your main residence (from the date of acquisition in June 1996 to the date the property is sold)
You advise that you had £20,000 enhancement costs, please note that general repairs, or decorating are not permitted, but just capital improvements, such a new bathroom, kitchen, roof etc
Please advise what the position as with the property for the 4 of the 17 years, that it was not let out.
Please also clarify that the rental income has been declared to HMRC.
And if you wish to know what the capital gains would be please also advise
1) The value at todays date of the property
2) The date the letting commenced (and ceased if hot ongoing)
3) How much in legal and estate agent fees you estimate that it will cost to sell the property
House inherited from Mother, Father lived in it for one year 1996/7 when he died.First let out Nov 1998 when it did not sell.
10 year let followed
Refurbished 1 year, then daughter and partner lived in it 1 year.
Let out June 2010 until April 2013.
All rental declared to HMRC.
Value now £200000.
Selling costs approx £4000
Thanks for your response
The position is as this
You are not entitled to any relief, on the basis that you never lived here as your main residence, and subsequently, no lettings relief is due either.
So its a straight forward calculation as follows
Sale price (estimated £200,000 less value at the time you acquired it £65,000, so the initial gain is £145,000
From this you can deduct the refurb costs of £20,000 and the cost (approx) to sell £4000
This leaves £121,000
The first £10,600 will be exempt, as this is your annual exemption allowance for the year of sale (assuming its just your sole name) this leaves £110,400 to be considered for capital gains
If you annual income is in excess of £42475 a year, then this gain will be fully liable at 28% = £30,912 capital gains tax.
But if your annual income is less than £42475, then some of this will be liable at 18% (the equivilent of unused basic rate band) and the remainder at 28%.
To calculate you unused basic rate band - you deduct your annual income from £42475 and this is your unused rate band.
(Just note that if your annual income is less than the personal allowances, which currently stands at £9440 then these are not available to use- so its the unused basic rae band between £9440 if under 65 and £42475)
Can I ask another question please.
Is it legal to move into the rental property, after selling our main residence, to avoid the tax?
Thanks for your further question
No its not illegal, but for HMRC to consider this, and remember this then means allowing private residence relief for the time you live there, plus up to £40,000 (max) of private lettings relief, then the time you live here has to be of a quantative nature.
So you will need to move all aspects of your life ( and dispose of any other owned property, or let it out) so that HMRC have no argument to disallow the releifs then claimed.
It is my intention to move within England, and I have had both the rental property (in my name) and our main residence (in my wifes name, historically for inheritance tax purposes-not relevant now) valued. If we moved to the rental property fully how long would we have to stay? The whole exercise is because our daughter is pregnant, and we want to move nearer to her.
Its not a question of time, but of quality (as advised above)
I assume its the inherited (rented out) property that is closer to your daughter or is it the current main residence?
If its the rental property, then as long as you rent out the current main residence AND move all aspects of you live to the inherited property, then this would reduce your capital gains.
But if you are meaning that you have to be back at the current main residence (as this is where your daughter is situated) then again, its not a question of time away from your main residence, or time in the inherited property, but that you move with the intention of remaining in the inherited property as your main residence with the full quality of running all aspects of your life.
If you then come back after 6 months,( having not let out or sold) to your current main residence, and then either sell or continue to let out the inherited property, then HMRC will treat this as merely an exercise to reduce the capital gains, rather than a true need/ intention to settle in the inherited property.
And on that basis, then will disallow any reliefs you have claimed to reduce the capital gain position.