Not – when are you exempt or not but when – at the time of sale or the next next self assessment?

Just sold our house (3 days, 6 viewings, 2 offers – yay!) and need to appoint solicitor/conveyancer tomorrow morning. Capital gains could be rather complicated to wriggle out of sort in this case I think. Just trying to work out if I need someone a bit comptent/specialist or I can choose for convenience/cost. If capital gains is paid at the time of sale I suspect the former, if at the next self assessment the latter and employ an accountant rather than bodge it myself as per normal.

ta

End of tax year in which asset is sold.

Excellent – thanks very much. I think that’s what I wanted to hear.

Reminds me need to check with solicitors if capital gains due on wife’s house, 6 viewings in 10 days, no offers yet 🤔

If it’s your main and only house then capital gains shouldn’t be a problem

If it’s your main and only house then capital gains shouldn’t be a problem

Any ideas how long you’d have to have it back as your main residence after It’d been rented out for a while to avoid paying CG tax? Or wouldn’t it be possible?

If it’s your main and only house then capital gains shouldn’t be a problem

Sadly, it’s not quite that easy.

It is the only home I own (and not owed another during that period either) but I have not lived in it the bulk of the time I have owned it. Owned it 15 years, lived in it the first 4, rented it out for 11. For the last 11 years I have lived in accommodation provided by my employer but in two different roles. The current role is on the list of approved roles which HMRC deem necessary that you live at work any you are exempt from capital gains on your nominated home (in this case as I only have one house, this one) and the other not. Chuck in some money spent on it to improve it when we bought it and lettings rate relief and capital gains allowance and its a mildly complex calculation.

Any ideas how long you’d have to have it back as your main residence after It’d been rented out for a while to avoid paying CG tax? Or wouldn’t it be possible?

As far as I know it does not work like that. It’s fractions of the the time that count. If you owned it 10 years and you lived in it for two and it went up in value by £100K you would be liable for CGT on 8/10ths so therefore 80K (they assume the value change is linear). However you can add some complexity by adding the fact that you are not liable for gains in the last 6th months (I think it is 6 months – used to be 18) no matter if you were living in it or not and in my case exemptions because of your job.

This is assuming you declare it……..as I understand there is a team of 2 for the entire country checking up on such things and I suspect if the rental period and the last time you made a self assessment for it was a long time in the past…well, would they bother/have the time to put it together.

Cheers Convert, that was just my wishful thinking!

I understand the 6 months is reducing to zero soon. Also, don’t forget you can net off your purchase costs, sdlt, legal fees etc.

Also, the top rate of cgt is only 28% so not taxed as income, unless you only owned it as an investment for 12 months and had no intention of living in it, in which case the gain is taxed as income.

Good luck with the calc, I am in denial about my cgt liability so just let the investments tick on.

Calculator here – http://taxtool.co.uk/

Hopefully a very simple question – is the annual capital gains tax allowance on top of ones personal income tax allowance before being taxed or can you only earn/gain about £12k in total before being taxed at all?

It is I believe. Specifically for the discharging of assets. As said above the tax rates are different for income tax and capital gains.

I’ve done a bit of back of fagpacket maths and tragically it looks like getting a bike on the bike to work scheme will just dip my income after pension contributions taken into account into a different tax band for my potential capital gains bill. It is so playing the system and so not what I think should happen but….n+1.

is the annual capital gains tax allowance on top of ones personal income tax allowance

You don’t pay any CGT if your gains are less than the Capital Gains Tax allowance, currently £12k. If you do have to pay, there’s an interaction with Income Tax that influences the rate you pay CGT at.

Cheers greybeard, Mrs dB’s house sale looks like it’ll be about £6.5k pa so should be well out of cgt, which is a relief as it would be the most complicated set of circumstances to work out otherwise & paying cgt on top of paying off your ex husbands debts would be a massive slap in the face when you only have capital gains on paper as result of those debts….

Mrs dB’s house sale looks like it’ll be about £6.5k pa so should be well out of cgt

Hate to break it to you but that’s not how it works. You don’t roll it up over the years; if you don’t use it in one year it’s gone forever. So for example if you had a house for 5 years and it went up by £50K i.e. £10K per year, you would be liable for capital gains on £38.5K of the profit (50-12.5=38.5). You don’t get to say £12.5K for every year owned therefore £60K allowance. Sorry.

Convert – thanks & oh sheet 😕 heaven knows where to start, fingers crossed only 2 years will count (assuming 18 months is still deductable… ) less estate agent and solicitors fees should bring her under the threshold, might need to find some real experts otherwise…

Forgot about this thread. I agree with all of convert’s posts

This is assuming you declare it……..as I understand there is a team of 2 for the entire country checking up on such things and I suspect if the rental period and the last time you made a self assessment for it was a long time in the past…well, would they bother/have the time to put it together.

Upto 2 year sentence, plus penalty and interest at 7.5% (?). I have capital gains to pay on a commercial property that I’ve owned for two years sold and didn’t rent out so would be easy to stay under the radar but not worth getting caught avoiding it.

It is the only home I own (and not owed another during that period either) but I have not lived in it the bulk of the time I have owned it. Owned it 15 years, lived in it the first 4, rented it out for 11

In which case there should be no CGT to pay. Unless it has changed then the exclusion was “only or main residence”. My understanding was that it was irrelevant whether you actually lived there or rented it out – to allow you to do exactly what you have done and not discriminate against people who lived in a house provided by their employer that they had no ownership of.

which is a relief as it would be the most complicated set of circumstances to work out otherwise & paying cgt on top of paying off your ex husbands debts would be a massive slap in the face when you only have capital gains on paper as result of those debts….

HMRC gets paid first so if there isn’t any money left after CGT liability is accounted for then the debts will have to be paid another way. Sorry.

EDIT. I assume that this would be the ONLY asset that is being sold? The allowance is a total allowance so if there are other assets being sold this may eat into the CGT allowance.

In which case there should be no CGT to pay. Unless it has changed then the exclusion was “only or main residence”. My understanding was that it was irrelevant whether you actually lived there or rented it out

That is generally not they case as if you’re living somewhere else your property I isn’t your only or main residence. It does appear form convert’s post that there are a limited number of loopholes.

That is generally not they case as if you’re living somewhere else your property I isn’t your only or main residence. It does appear form convert’s post that there are a limited number of loopholes.

This is my perception too based on the limited advice I have been given. It is only if the role you do for your employer means it is essential that you live in the accommodation provided. Light housekeeper for example. In the last 11 years whilst we have rented our (only) house out I have done 3 roles for my employer. One where is it absolutely essential, one that it was not and a third (which was a subsidiary role to the first for a couple of years) which is very grey.

Beyond me though I feel slightly irked by the rules as they stand. I’m in a very privileged position where my employer provides me free (now free, was discounted in previous role) accommodation and living in it has reduced my commuting cost to zero so the numbers still stack up. But if you had a house and lost your job and to remain in employment (saving the government money both in terms of not being on benefits and paying income tax to their coffers) you move to another part of the country to get a new job. You rent out your house to offset the cost of the rent you are paying to live near your new work. You would have thought this would be what the government wanted to do. Instead you have to pay income tax on the ‘profit’ you make on the rent you are making on your house so if you are living in a like for like property you are already down on the deal. Then you have to pay capital gains when you come to sell your house because you dared to move away from family and friends to stay in employment. No fair.

It’s a long while since I studied tax but I remembered it as being more straightforward – if you only had one property it didn’t much matter what you did with it. It seems not.

https://www.theguardian.com/money/2004/dec/15/expertsproperty.property1

That link ^^^ is nearly 15 years out of date, i’m not sure how much will have changed?

No if you just own 1 property but let it out, each let year is a non lived in year. Then add the I think 6 months allowance, plus any years which the govt deem are allowable due to work.

Then it’s 18 or 28% on the net gain, based on linear growth. First 12 k free unless you capitalissdany other gains on shares for eg.

I wouldn’t try and dodge it, there may only be 2 people policing it but even I could knock up a program querying land registry disposals and council tax or voting records.

Hope it helps

It is about 4 years ago that I last did this, but I believe convert to be correct in that if you don’t live in it, but rent property elsewhere for work purposes, then it no longer counts as your main and only residence. I argued with the HMRC that this reduced labour mobility and penalised career development, more for the pleasure than because I thought I’d get anywhere, but they were adamant that this was the standpoint.