I used to live in Falmouth but moved to Bristol 2 years ago. We kept the house in Falmouth and bought a house in Bristol. The idea was to sell the Falmouth house once we had moved. I work from home and have 2 small kids so any sort of chain was going to be a killer. Unfortunately the housing market crashed so we were unable to sell the house in Falmouth, and ended up renting it out.

Now our tenants are moving out and we have accepted an offer to sell it.

The house increased in value while we lived in it, but, not while it was rented.

Do we have to pay Capital Gains tax on the profit or would it only relate to time it was a rental / second home?

Thanks for any help…

IIRC you have 3 years grace to sell it to avoid CGT.

There's loads of stuff on the hmrc.gov.uk website about this. I'm in a similar situation so have done a bit of research but would advise you don't take my word for it!

Essentially, since it was once your primary residence, you have 3 years after you move out before you have to pay CGT. After that time, you only pay tax on the time it was not your home plus 36 months. The difference in price over the whole time counts, not just the gain over the taxable portion.

If you do have to pay tax, you get 10K personal allowance and then there is lettings allowance but I haven't worked that bit out yet.

So, to make a very boring story slightly less boring, you don't have to pay – but do your own research to make sure!

hope that helps

jon

I think it's the increase on when you weren't living in it. I'd hope a google would come up with the answer.

EDIT: the above is clearly BS.

I used to live in Falmouth but moved to Bristol 2 years ago.

Under last years rules CGT would not be payable as you rented it out for less than 3 years. What the rules will be for this tax year I can't say as if there are any changes I don't know if they will apply to the whole of the year or after the changes were made.

The house increased in value while we lived in it, but, not while it was rented.

Do we have to pay Capital Gains tax on the profit or would it only relate to time it was a rental / second home?

Again under this years rules the CGT is calculated on the whole of the gain not the gain for the time it was rented. There are however dedcutions that can be applied to reduce this figure to account for the time it was your sole residence.

[edit] I've been doing this calculation for the sale of a property of mine that I sold at the tail end of this year.

I suspect you have to declare the house as your 'primary residence' to avoid CGT. To do so, I think you just write to your local ( to your primary residence) tax office and say so. Check on hmrc.gov.uk – there is stuff on there about it.

Excellent replies guys.

We moved out 2 1/2 years ago and are in the process of selling. Should complete next month.

Looks like we wont have to pay under the 3 year rule. More money more shiny bits….

iirc – there isn't a 3 year rule.
Simply put – capital gains is payable on the proportion of the period to which you were not living in the property.
ie. if you lived there 3 yrs and rented out for 7 yrs. Capital gains is due on 70% of appreciation over 10yrs.
However, and this is a big however, there is something called lettings relief (circa £40K) allowable on your property (since it used to be your PPR – principle place of residence) and this can be claimed twice over in the case of a joint ownership.

There is effectively a 3 year rule. The deduction that you make on the gain to account for the time you lived there is

Total gain *(Months lived in + 36)/Months owned

which in your example would be

Gain * (36 + 36)/120

so CGT is payable on 40% of the gain, however there are other deductions like CGT allowance and selling costs that may or may not be applicable also.

Again that is based on last years rules. This may change for this year.

just googled and found the 3yr rule – would the Bristol home have to have been nominated as the PPR?

thought CGT was now a flat 18%?

thought CGT was now a flat 18%?

At the moment it is, but this is only applied after all the deductions have been made.