CGT question

[Quhet]

I'm in the process of selling a flat to the tenants who currently rent it from me.

I originally bought the flat in 2018 to live in, and did so officially until 3 years ago when I re-mortgaged it to a BTL product and bought a place with my current partner.

I know I'll have to pay CGT when the sale completes, but will this be on the value it's increased by since I bought the flat in 2018, or since I remortgaged it in 2021?

Probably a pretty basic question but it would be good to know roughly what I'm working with here...

[Rollin]

CGT is on difference between selling and buying price minus selling and buying expenses and private residence relief for the period you lived in it.
More info here and a calculator.
https://www.gov.uk/tax-sell-home/work-out-your-gai...

[Eric Mc]

And you must sign up with HMRC on-line so that you can submit your CGT calculations and pay any resultant CGT within 60 days of completion.

You do get relief for the time period for which the property was your main residence. So, if you owned the property for five years and lived in it for three, whatever gain you calculate will be reduced by 45/60 (36 months plus 9 out of 60 months of ownership.

An example -

Property cost £100,000
Sale Proceeds £200,000
Period of ownership - 5 years (60 months)
Period it was main residence - 3 years (36 months)

Gain - £100,000

Exempted part of Gain - £100,000 x 45/60 = £75,000
Chargeable part of Gain - £25,000

Taxable part of gain - £19,000 (£25,000 less personal Capital Gains Tax allowance - £6,000 2023/24)

From 6 April 2024, this allowance is reducing to just £3,000. As recently as tax year 2022/23 it was £12,300.

[Quhet]

Eric Mc said:

And you must sign up with HMRC on-line so that you can submit your CGT calculations and pay any resultant CGT within 60 days of completion.

You do get relief for the time period for which the property was your main residence. So, if you owned the property for five years and lived in it for three, whatever gain you calculate will be reduced by 45/60 (36 months plus 9 out of 60 months of ownership.

An example -

Property cost £100,000
Sale Proceeds £200,000
Period of ownership - 5 years (60 months)
Period it was main residence - 3 years (36 months)

Gain - £100,000

Exempted part of Gain - £100,000 x 45/60 = £75,000
Chargeable part of Gain - £25,000

Taxable part of gain - £19,000 (£25,000 less personal Capital Gains Tax allowance - £6,000 2023/24)

From 6 April 2024, this allowance is reducing to just £3,000. As recently as tax year 2022/23 it was £12,300.

Very useful, thanks

[jrb43]

In case anyone else has the question I was about to ask:

"The final 9 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point. If you are living in the property within those final 9 months, they are not added on again" (HMRC)

Edited by jrb43 on Friday 22 March 00:22

[Caddyshack]

Use an Accountant as there are reliefs and a period that you can let it for after moving out and not pay CGT.

[Eric Mc]

jrb43 said:

In case anyone else has the question I was about to ask:

"The final 9 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point. If you are living in the property within those final 9 months, they are not added on again" (HMRC)

Edited by jrb43 on Friday 22 March 00:22

All included in my calculation above.
The grace period used to be 36 months.

[Quhet]

Caddyshack said:

Use an Accountant as there are reliefs and a period that you can let it for after moving out and not pay CGT.

Yeah, I'm not going to leave it to chance. I'll probably find out that I could've also been claiming all sorts of relief on my self assessment over the last few years too

[jrb43]

Eric Mc said:

jrb43 said:

In case anyone else has the question I was about to ask:

"The final 9 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point. If you are living in the property within those final 9 months, they are not added on again" (HMRC)

Edited by jrb43 on Friday 22 March 00:22

All included in my calculation above.
The grace period used to be 36 months.

Yes, thanks Eric. I was about to ask “what’s the random 9?” Which is why I had to look it up

[Alex Z]

Do the calculations always assume linear price growth, or is there any provision for specific valuations to be taken into account?

Given the nature of the housing market, the house could have increased significantly during the period you lived in it, then fallen after you moved out (or indeed quite the opposite). A valuation could provide confirmation of this, though of course they are only someone's opinion on what it might be worth.

[Quhet]

Alex Z said:

Do the calculations always assume linear price growth, or is there any provision for specific valuations to be taken into account?

Given the nature of the housing market, the house could have increased significantly during the period you lived in it, then fallen after you moved out (or indeed quite the opposite). A valuation could provide confirmation of this, though of course they are only someone's opinion on what it might be worth.

I've got the mortgage valuation to fall back from 3 years ago if necessary. Showed a 30k uplift from 2018 - 2021

[Eric Mc]

jrb43 said:

Yes, thanks Eric. I was about to ask “what’s the random 9?” Which is why I had to look it up

It was explained in my post, I thought.