Rented House & Capital Gains Tax
 

I'm Currently renting out my one & only house. I would like to continue renting it out but do not want to be liable for paying capital gains tax if I sell it. I understand if it is rented out for more than 3 years I will be liable for CGT.

The present tenant has been in the property for 22 months, the house was previously empty for 8 months & prior to this it was rented for 4 months. With regards to CGT liability would this be classed as 22, 26 or 34 Months?

It depends upon whether you were deemed to have been living there for the empty 8 months. My understanding is that if during that 8 months all bills were reassinged to you etc (ie it was your primary residence), then it'll only be 22 months.

If not the I reckon it'll be deemed to be 34 months. There are CGT issues dependant upon how long it is rented out for too.

I'd get a specialist tax advisor to help.

Tim

This was in the Torygraph a week or so back.
It might help.

Ains. ;)

There are a number of useful reliefs and exemptions you can claim. For anyone selling a property, much will depend on whether or not it has ever been their home. If it has, you can claim Principal Private Residence (PPR) relief for any period when it was your only or main residence, plus the final three years of ownership in all cases.

This means that, if you have always lived there - or moved out less than three years before selling up - you will not have to pay any tax at all.

If you moved house and then rented out your old home, you could have additional relief on top of PPR.

This extended relief can exempt up to a further £40,000 of any gain not already covered by PPR. The relief is allocated to a person, rather than a property, so if a husband and wife own a property jointly, they could have up to £80,000 knocked off the gain in this way.

There are other reliefs that apply to all properties and not just to those residences qualifying for PPR. If you owned the property before 1998, you will qualify for indexation allowance, which was based on the Retail Price Index and was intended to strip out the inflationary element of the gain. This was abolished in 1998 (when inflation looked dead as a dodo) and replaced by taper relief, which, after you have owned the property for three years, knocks 5 per cent per annum off the gain each year until year 10 - so the gain will be reduced by 40 per cent after 10 years. This is intended to encourage and reward long-term ownership rather than short-term speculation.

You should never overlook the annual CGT exemption - currently £8,500.

As spouses (and, from this December, civil partners) can transfer assets between themselves without tax consequences, it makes sense to gift a half share to your spouse or civil partner before a sale so they can make use of their annual exemption as well as your own. You need to do the calculations first, but this could result in a lower overall tax rate. However, the gift must be made with no strings attached.

You have U2U

Depends whether you are also living in there. If you are then only part would be liable anyway and even then there is a £40k exemption.

If you have left the property then the last 3 years of ownership are exempt and treated as your residence regardless of where you are as long as you have been resident in there at some point during ownership.

The gain if any would be apportioned between residence and non. Let me know if you want any more info.