- Help please – capital gains tax on rented property?
I am just about to put my house on the market. I’ve owned it since Feb 2007 when it was my main residence and it’s been rented out since September 2008 until now. Am I liable to pay capital gains tax on the difference between what I bought it for and what it’s sells for? I’ve done a quick hunt on-line and I can see some new stuff about a ’36 month rule’ but I am obviously a bit thick as I still don’t get it 😳
Obviously i’ll pay whatever I need to – I think it’s likely that the house will only sell for about £20k more than I bought it for, which is purely due to the fact I completely renovated it over the year or so I lived there!
Any advice would be much appreciated. I am getting into a right old panic about this as my situation has changed entirely in the past year and I need every penny to buy somewhere new (I am currently renting in a new area).
Thanks 🙂Posted 5 years agoRo5eyMember
My unprofessional understanding is nothing to pay for the first 36months then a sliding scale type thing up to five years after the first three… So not the full tax amount straight after 3 years…. but the full amount after eight
Edit … oh yeah forgot the CGT allowance of about 10500 per annum… you might not have to pay nowt ??
But get an accountant to sort it for you… it’ll be money well spent.Posted 5 years agotoys19Member
You should talk to an accountant, but there used to be a thing where you do not pay CGT on the price growth in the 1st three years after renting, but only if it is your only house.
So it is something like this:
fisrt threee years is sept 2008 -sept 2011 say it grew from 100k-110k. Then no tax on that.
Then Sept 2011 -april 2013 if it grew to 120k, then CGT on the 10k growth. But you also have a tax free CGT allowance which is 10k ish I think..
You need to speak to an accountant. I ask mine this question every so often as I have a few rental props and am always pleasantly suprised by his predictions of how little tax I would have to pay if I sell..Posted 5 years ago
toys19 – phew, that sounds a bit better. Thank you!
I understand the reasons for the tax but I spent every penny I had on renovating the house and than have made bugger-all on renting it over the years (my mortagage is more than the rental income) so it has not been a huge financial success!! I’m therefore pretty keen to not pay out any moe than I have to on selling 😉Posted 5 years ago
You will live up to your name. You are deemed to occupy the property for the last 36 months so you have occupied it for 55 months (19 actual and 36 deemed). You have owned it for 73 months so only 73-55/73 of any gain is taxable assuming you sell it this month, which will be £7.7K which is within the annual cgt exemption.
(You will probably qualify for letting relief as well but you don’t need it if this is your only gain.)
Renovation costs could be deducted as well.Posted 5 years ago
Oooh – thank you mefty – this is fab news 🙂
My brain doesn’t really work in numbers so on the basis that my figures are correct, i’ll take your word for it!
Do I need to do anything to prove this or do I just shove the money from the sale in my bank account (and sign the non-money laundering things) and that’s that?Posted 5 years ago
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