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taxadvisor.uk, Chartered Certified Accountant
Category: UK Tax
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Hi Sam. Completion certificate was issued in February 2011

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Hi Sam. Completion certificate was issued in February 2011 and due to a job relocation, I had to let out my property but wish to sell it next year. Do I have to pay 40% capital gains tax or is there any way of avoiding this if I move back to the property and use it as my main residence? Thanks. Alison

Hello and welcome to the site. Thank you for your question.

Your question was addressed to another expert. It has been made available to other experts to answer

Can I help you?

If so, please advise
- period of ownership and date ownership taken.
- period property let
- is it still let
- Did you live in the property at all
- Likely gain if you sell it next year


Many thanks
Customer: replied 4 years ago.


Hi


 


In response to your questions:


 


1. Moved into the house in April 2011. This was date of ownership.


2. Property let from October 2012 to present date.


3. Yes still let. About to extend the lease for 6 months to a year.


4. Yes lived in the property from April 2011 to October 2012.


5. Not sure of likely gain because it cost approx £225,000 to build plus a lot of extras to furnish etc. I imagine it would sell for around £300,000 in current climate.

Thank you for your prompt reply.

Capital Gains tax calculation

Main residence (Apr 2011 to Sep 2012) = 18 months

Rented period (Oct 2012 to say Sep 2013) = 12 months

Total period of ownership (18+12) = 30 months

Capital gain say (300,000-240,000) = £60,000


Relief available

Private residence relief = 18 months

The final three years (36 months) always qualify for relief, even if you weren't living there, as long as it's been your only or main home at some point during the time that you've owned it.


Based on above, all gain would be covered by private residence relief and no CGT payable.

CGT rates are 18%, 28% or a combination of both depending on your total taxable income in the tax year of sale.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 4 years ago.

Hi


 


That is very good news. Sorry for my ignorance but does that mean that I have got to sell within the 36 month period since taking up ownership which was April 2011? Will I be penalised if I don't sell until October 2014 which is the date that I am tied into a mortgage?

Thank you for your reply.

You don't have to sell it by Oct 2014. You could live in the property for years to come. The period you live in it would be covered by private residence relief. Your exposure is period property is let.

Here again, although the property may have been let during the period of ownership, because it was your main residence at some point, there is a further relief available called “letting relief”. The maximum letting relief available is £40,000.

More information on private residence relief is covered in HMRC Helpsheet 283..link here
http://www.hmrc.gov.uk/helpsheets/hs283.pdf

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.




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