I bought my house in 2000 for £40k, and lived in it until October 2007 when it was valued at approx £115k. Since October 2007 I have been letting the property, and declaring it through self assesment. I'm now thiking of selling the property, and its currently worth about £100k.
I'm sure I've read some where that the only way to avoid paying capital gains tax is to move back in for 6 months, or at least have bills in my name at the address for 6 months?
Do I have to pay capital gains on the £60k, or just pay capital gains based on what the market value was when I started letting the property compared to the current market value?
Thanks
You would only pay capital gains on the change in value from the date you moved out to the sale date less your personal allowance (and other deductables).
Since the asset has made a loss in that time then you ought not to have a taxable gain. You will need to have a stab at providing a valuation for Oct-07. However Im not a tax lawyer.
Is it your only property? If so, I don't think you pay any CGT...well, that was my understanding.
only if it's your main residence nuke.
Stoner is correct. You have no Capital Gains liability. You may have to do some paperwork to prove this if you fill out a tax return.
Blimey, its a minefield. We moved out of our property last year and into a rental as we wanted to move areas because of schools. Are you saying that from the time we moved out we'd be liable for CGT if the property went up in value even though its our only property?
nukeproof - if its your only property, the rules are different.
No CGT at all if you sell before October 2010. TCGA 1992 s 223(a).
Sorry Stoner, I disagree.
You are paying tax on the fraction of the gain equal to the fraction of your period of ownership in which it was not your main home plus the last 36 months, divided by the period of ownership. It doesn't matter whether the value actually went up while you were living there or while you were renting it.
You get relief for a proportion of the gain, it doesn't cease to be tax-free and become taxable when you start renting.
aha.
so the gain period is over the whole period of ownership but taxation is proportional to time. I suppose it saves on having to do a theoretical historic valuation. I'd forgotten about the 36 months thing, going to benefit from it too....
[hijack]cheers for that Law Journal article. very well put by the author[/hijack]
Yeah, and when you watch all these get rich quick property development shows, they never mention CGT! Or any of the other costs; stamp duty, mortgage arrangement fees, solicitors fees, agent's or auctioneer's fees, monthly interest on the outstanding debt, council tax liabilities etc. And in many cases, the amateur developer doesn't even include his labaour costs.
Now I'm confused...
Original Poster has owned house for ~9 Years.
It has been rented for ~2 years
I think having read above that essentially you can rent it out for up to 36 months without paying any tax?
So what happens if it is 37 months. Is the tax calculation
Tax payable = "Change in Value" * ( 1 month / Period of ownership + 36months)
Not exactly sure about tax as regards renting the property out but the capital gains also qualify for "Tapered relief", the longer you've owned the property the less tax you'll pay.
Nope. Taper was abolished when the 18% rate came in.