Capital gains tax on buy-to-let

[alphonso]

Sorry if this has been covered, this is my situation...

Bought a flat in 2000 for £150k, moved out in June 2007, it's been rented out since then, for exactly 3 yrs. It's now worth around £310k.

I understand that if you have a primary residence that is let out, you have 3 yrs cgt free if you decide to sell. Any time after that you pay a proportion of cgt (taper relief).

So if I sold up, assuming no further price change, are these 3 scenarios correct...?

Sell today = zero cgt
June 2011 = 18% of 1/11th (1yr out of the 11) x £160k (price increase) = £2,600
June 2012 = £4,800 (18% x 2/12 x £160k)
June 2013 = £6,600 (18% x 3/13 x £160k)

At 40% cgt
sell today = zero
June '11 = £5,800 (40% x 1/11 x £160k)
June '12 = £10.700
June '13 = £14,800

At 40% cgt with no taper relief
????
sell at any point, the cgt = 40% x £160k = £64k

Are these correct? Can I move back into the flat and sell at any time?

[wiffmaster]

Taper relief was abolished in '08 when the rate was set at 18%. So, you either need to sell quickly to fall within the three year exemption, or you need to 'move back in' to your flat, designate it primary residence and so avoid CGT that way.

[alphonso]

so you're saying if I sell up after June '10, I'd be liable for 18% of the total gain over the last 10 years... ie £29k ?

[MuffDaddy]

Less CGT allowances, less the costs of buying and selling and any major investments.

Are you boohooing because you have to pay tax?

[touching cloth]

It's virtually impossible to say with any authority given they are about to overhaul the CGT system, raising rates from the current 18%. However whatever happens it is very unlikely you will be liable for very much at all, certainly not any for the period you lived there and very unlikely for 3 years extra assuming they keep that in place. You may then be liable from that point for further increases from now till date of sale but tbh by the time you include your personal allowances I would be fairly confident you will find a zero liability.

[touching cloth]

MuffDaddy said:

Are you boohooing because you have to pay tax?

To be fair I don't think he was. The OP appears concerned from the first response that if he doesn't sell within the 3years (or move back in) then suddenly CGT liability will be retrospectively applied to any profit made from date of purchase, despite him having lived there for 7 of the 10 years. He will under the current system (if I understand it all correctly) still be entitled to that CGT exemption for his time there and also the 3 extra years, any CGT would therefore be liable only on gains outside of this and would likely be within his personal allowance.

[alphonso]

Yes, thanks guys. I wanted to sell it in 2 yrs time to help pay down my main mortgage (I can't pay it off any earlier) and was deciding whether or not to sell it sooner rather than later.

If there was going to be cgt bill it might've been more prudent to have sold it now and put the money in a savings account. I'd forgotten about the personal allowance which will easily cover any yearly gain so I can leave it all as it is.

[MuffDaddy]

[quote=alphonso]stuff[quote]

I withdraw my previous post and offer an apology.

[Ken Sington]

The press are as usual stoking up hysteria on this subject, saying the market will now be flooded by b2l property and prices will tumble as a result. Since sensible b2l'ers bought for the long term due to otherwise feeble pension provisions, I can't see this being the case.