- Two houses, tax implications, any knowledge pls
Hi, sorry, but want to understand tax issues if I end up with more than 1 house – as it will make the buying/selling chain free and allow the possibility of renting.
If I hang on to my main house (lived there permanently > 10 years) and end up living with gf in a new house I believe I have a 3 year window where my ‘ex main house’ remains CG tax free irrespective of whether I rent it – is that correct ?
If I were to rent if for > 3 years on what are you CG taxed on ? – from original purchase date, from starting rent date, from starting renting date + 3 years
Any other knowledge greatfully received.Posted 5 years ago
When I sold my place this is how the gain was calculated. I’m guess the procedure hasn’t changed but the tas rates and allowances may have.
First you have to figure out the total capital gain
(Selling price – purchase price) = gain
The purchase price is the actual price you paid. Calculate the gain per month of ownership again this is based on the total time you owned the place, lived in + rented.
Calculate the tax exempt portion of the gain
Exempt = Gain per month * (number of months lived in property + 36)
Subtract this and the Capaital gain allowance (assuming you’ve not used it for anything else!)from the total gain to give a taxable portion.
Taxable portion = gain – exempt – allowance
Multiply this Taxable portion by the capital gain rate (it was 18% when I sold my flat but it may be different now) to give the total amount you will owe HMRC.
Tax Payable = Taxable portion * CGT ratePosted 5 years ago
live seperately from gf and planning to move in together to new house (as we live 40 miles apart) which suits both.
Not being in a chain appeals and longer term I think (*maybe) renting my house would be better
What I think is the case
– if I sell my ‘old main house’ within 3 years(Unrented) it is CG tax free
– if I rent it for those 3 years its is still CG Tax free
– if I rent it for > 3 years (with it declared as my main home) then
I will pay CG tax based on:
– entire length of ownership
– time as main home/time rented/ – 3 years/ empty time
You bought your house in January 2000 and sold it in
December 2012, owning it for thirteen years. You lived
in the property as your only or main residence from
January 2000 to December 2005 (six years). It was then
let as residential accommodation
from January 2006 to December 2008 (three years) and
then empty until sold at a gain
of £150,000. You are entitled to Private Residence
Relief for nine years (six years of
residence plus final 36 months) out of thirteen
years this part of the gain is £103,846
(9/13 x £150,000). Your remaining gain is £46,154.
The lowest of the three limits set out above is the
gain by reason of the letting £34,615
(3/13 x £150,00) so you are entitled to further
letting Relief of £34,615. Your chargeable
gain will be £11,539.
*Curently don’t understand letting relief.Posted 5 years ago
Gusamc, that is correct but it’s calculated in months not years. You then deduct your capital gains allowance (currently £10,600)from the gain and pay tax at the 18 or 28% depending on your income.
If you tie the knot with the girlfriend then you are able to gift all or part of the property to her too with no capital gains. When you do this you can make use of her capital gains allowance too or transfer the remaining chargeable gain to a lesser rate of tax.
Remember that in calculating the gain it’s the selling price less selling and legal fees less the cost of the property less any purchases fees.
Letting relief is the lower of £40k, the PPR or gain when it was letPosted 5 years ago
All the gains you have made are covered for your first 3 years renting already. You would need to be make large gains again whilst renting to be paying any CGT and such a housing boom is unlikely now.Posted 5 years ago
Best thing to do is keep repeating the calculation after 3 years renting and do so annually. When it looks like you are going to be paying capital gains tax start thinking about selling then but it will need to be weighed up against rental income too.
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