CGT on flat sale - advice needed

[tracer.smart]

I am completing on the sale of a leasehold flat my wife and I have owned for 13 years.

I could use some advice on CGT and making sure I don’t end up accidentally with more liability than is due.

Originally this was bought as a main home, and we lived in it for around 5 years.

We then bought another house which became our main family home, and continued to use the flat when each of us were working in the city. We rented a room out in the flat so there was coverage of overheads..

This arrangement has continued to present day and the sale.

How do I calculate what CGT private residence relief I am entitled to?

[guyvert1]

Start googling ? https://www.optimiseaccountants.co.uk/uk-capital-g...

[C69]

All the steps and calculations are here: https://www.gov.uk/tax-relief-selling-home

It sounds like the person who was living in the flat was a single lodger rather than a tenant? If so, that could make a difference.

[Martin315]

C69 said:

All the steps and calculations are here: https://www.gov.uk/tax-relief-selling-home

It sounds like the person who was living in the flat was a single lodger rather than a tenant? If so, that could make a difference.

Not sure it makes any difference at all if the main home is designated as such for CGT purposes

[Eric Mc]

Once you moved out and acquired a new main residence, then the flat started being liable to CGT. It doesn’t matter whether it was let or not.

[tracer.smart]

Thanks all, and for the links - they are really helpful.

Does 100% private residence relief apply for the proportion of time during ownership when the property was the main residence? For 40% of my ownership, this was my main residence.

And if I used it for 20% of the working week in times when this was not my main residence to be closer to the office, does this also qualify for relief?

[Eric Mc]

Regarding the “closer to the office” statement - the answer is “no”.

You need to engage an accountant.

[Llandudno]

How did you declare the rental income? Did you claim Rent a Room relief or as regular property income?

[tracer.smart]

Declared as regular income.

[Eric Mc]

That would mean that there is no Rent a Room exemption available when computing the CGT as you did not avail of the scheme.

[Grandad Gaz]

Eric Mc said:

Once you moved out and acquired a new main residence, then the flat started being liable to CGT. It doesn’t matter whether it was let or not.

Slightly off topic here but, we bought a holiday home in North Norfolk 14 years ago, which we never let out. Personal use for us and family only. We moved into it permanently 3 years ago after selling our main residence in Hertfordshire.
We are considering buying another property nearer the local town in the near future and moving into it but, probably keep our existing house and getting a holiday cottage letting company to manage it for us.
Presumably, we would need to get it valued when we do so, to give us a base to work with when it comes to CGT in the future?

[DaveA8]

For the sake of £250 or £300 on the sale of a large asset that has likely appreciated and has some very specific compliance issues, I'd be for getting proper advice that you can stand behind.
It's not just what they can get from you in terms of compliance, it's the fact that if they come knocking, the ask the most pointless, inane and unanswerable questions and believe me you will get sucked in.

[Eric Mc]

Grandad Gaz said:

Slightly off topic here but, we bought a holiday home in North Norfolk 14 years ago, which we never let out. Personal use for us and family only. We moved into it permanently 3 years ago after selling our main residence in Hertfordshire.
We are considering buying another property nearer the local town in the near future and moving into it but, probably keep our existing house and getting a holiday cottage letting company to manage it for us.
Presumably, we would need to get it valued when we do so, to give us a base to work with when it comes to CGT in the future?

No absolute need to get the property valued.

CGT is based on what you sell it for minus how much it originally cost (with ancillairy costs being allowed as an offset too). If the property was your main residence for some of the time you owned it, the gain is reduced on a time apportionment basis using the length of time you owned it versus the length of time it was your main residence as the fraction to be applied.

For example -

Gain on Disposal - £100,000
Period of ownership - 50 months
Period it was your main residence - 22 months

The gain is apportioned using the fraction 31/50 (HMRC also gives you an additional; "free" 9 months)

In this case this would mean that £62,000 of the gain would be excluded from the CGT calculation as that is the proportion of the gain attributable to the period the property was your main residence i.e. £100,000 x 31/50)..


That would leave £38,000 as the chargeable gain.

[Grandad Gaz]

Thanks Eric.

[tracer.smart]

Eric Mc said:

Once you moved out and acquired a new main residence, then the flat started being liable to CGT. It doesn’t matter whether it was let or not.

Thanks Eric. From a property sale perspective, do you know if renting a room in a second residence is still classed as a residential sale, versus sale of a letting asset? Does it matter from a conveyancing and CGT point of view?

[Eric Mc]

tracer.smart said:

Eric Mc said:

Once you moved out and acquired a new main residence, then the flat started being liable to CGT. It doesn’t matter whether it was let or not.

Thanks Eric. From a property sale perspective, do you know if renting a room in a second residence is still classed as a residential sale, versus sale of a letting asset? Does it matter from a conveyancing and CGT point of view?

Renting a room in a property which isn't your main residence is just a normal rental situation. In other words, the Rent a Room criteria do not apply. If you have a second property and are renting a room in it, it is still a second property which is not your Main Residence and will therefore be subject to CGT when disposed of (assuming there is a gain, of course).

[tracer.smart]

Thanks - yes a large CGT sum is due on this. I will notify the conveyancing solicitor this is a Lettings property rather than a residential, not sure why it matters to them, but they seem to want to know.

[Eric Mc]

tracer.smart said:

Thanks - yes a large CGT sum is due on this. I will notify the conveyancing solicitor this is a Lettings property rather than a residential, not sure why it matters to them, but they seem to want to know.

It IS a residential property in that it is used as a place for people to live in. There are different Capital Gains Tax rates for gains on the sale of Residential Properties (houses, flats etc) compared to commercial properties (factories, warehouses, farms, offices etc).