A capital gains tax property sale question
Discussion
Hi all, looking for advice from the great & good. 
In approx 1984 wife and I bought a flat as our first home.
10 years later we bought and moved to our next home, keeping the flat as a rental property.
We have now decided to sell the flat.
We understand we would need to pay capital gains tax, but how is this calculated? Is the value when we bought the flat used to calculate, or the value when it ceased to be our main home, or what?
Is there an allowance for property maintenance, and can we include mortgage costs/interest etc (I've been told no to the latter). Or the service charge we've paid per annum?
Grateful for any advice, TIA.
ETA Apologies if this should be in Finance.
In approx 1984 wife and I bought a flat as our first home.
10 years later we bought and moved to our next home, keeping the flat as a rental property.
We have now decided to sell the flat.
We understand we would need to pay capital gains tax, but how is this calculated? Is the value when we bought the flat used to calculate, or the value when it ceased to be our main home, or what?
Is there an allowance for property maintenance, and can we include mortgage costs/interest etc (I've been told no to the latter). Or the service charge we've paid per annum?
Grateful for any advice, TIA.
ETA Apologies if this should be in Finance.
Edited by heebeegeetee on Tuesday 21st March 16:35
There's an online calculator which may help you
https://www.gov.uk/tax-sell-property/work-out-your...
You need to know things like the dates it was bought and sold,the amounts you paid in buying and selling, the dates you lived there, how much you spent on improvements and so on. Quite a lot of detail and questions to answer.
https://www.gov.uk/tax-sell-property/work-out-your...
You need to know things like the dates it was bought and sold,the amounts you paid in buying and selling, the dates you lived there, how much you spent on improvements and so on. Quite a lot of detail and questions to answer.
SlimJim16v said:
How would they know? 
I was 'slow to declare' that I had sold a house that I part-owned and was not my main residence. I received a phone call asking me questions in such a way it was obvious that they knew but giving me the chance to come clean. I had to pay the tax due plus extra because of the late payment. Eric Mc said:
SlimJim16v said:
How would they know?
They have ways and means - the Land Registry for a start and HMRC also has a Property Sales Inverstigation team that you do not want to fall foul of.We have one that we do by the book but know a couple of people who rent their property to a “friend” cash in hand without any contract, deposit protection, etc. We,ve told them they are asking for trouble as with current technology there must be a way to cross reference the property owner with who’s living there?
Many thanks for the replies guys, I wasn't aware of the online calculator.
I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
heebeegeetee said:
Many thanks for the replies guys, I wasn't aware of the online calculator.
I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
If you move back into the flat and live there for a while you could avoid all CGT. Beware though as this has to be geniune. This can also be checked.I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
Kwackersaki said:
Do they also investigate rental properties and landlords?
We have one that we do by the book but know a couple of people who rent their property to a “friend” cash in hand without any contract, deposit protection, etc. We,ve told them they are asking for trouble as with current technology there must be a way to cross reference the property owner with who’s living there?
The answer is they can and sometimes do. However, due to limited resources (UK governmental institutions are not functioning properly due to under-resourcing), they may not pick up on the fact that rent was not declared until the property is finally sold. The key trigger point for their investigations seems to be when they spot a property sale in the name of an individual but they can see that the address is not the adress of the individual's main residence.We have one that we do by the book but know a couple of people who rent their property to a “friend” cash in hand without any contract, deposit protection, etc. We,ve told them they are asking for trouble as with current technology there must be a way to cross reference the property owner with who’s living there?
It is actually an easy thing to spot - if they bother to check. However, not every such transaction gets picked up.
I had a client who had two rental properties for ten years and never declared any rental income in that time. However, as soon as one of the properties was sold, the you know what hit the fan. She was lucky not to go to jail.
I hasten to add, she only asked me to act for her BECAUSE she had already been picked up by HMRC. She was not a client in the period she was failing to declare,
Edited by Eric Mc on Wednesday 22 March 10:06
heebeegeetee said:
Many thanks for the replies guys, I wasn't aware of the online calculator.
I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
No - just take the hit. You made the gain - you pay the tax.I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
Did you not offset the interest charges against the rental income?
Is the property jointly owned?
Was there enhancement expenditure over the period of ownership?
Did you sell the property before 5 April 2023
Have you signed up to submit the CGT figures online (it's compulsory).
heebeegeetee said:
Many thanks for the replies guys, I wasn't aware of the online calculator.
I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
Surely you already offset the mortgage interest against the rental income received each year from 1994 through to 2021?I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
Plus if you owned from 94 to 23 and lived in it for 10 of those 29 years, youd get relief against approx 10/29th's of the capital gain.
Do you have an accountant?
Edited by bennno on Wednesday 22 March 10:21
Eric Mc said:
The answer is they can and sometimes do. However, due to limited resources (UK governmental institutions are not functioning properly due to under-resourcing), they may not pick up on the fact that rent was not declared until the property is finally sold. The key trigger point for their investigations seems to be when they spot a property sale in the name of an individual but they can see that the address is not the adress of the individual's main residence.
It is actually an easy thing to spot - if they bother to check. However, not every such transaction gets picked up.
I had a client who had two rental properties for ten years and never declared any rental income in that time. However, as soon as one of the properties was sold, the you know what hit the fan. She was lucky not to go to jail.
I hasten to add, she only asked me to act for her BECAUSE she had already been picked up by HMRC. She was not a client in the period she was failing to declare,
just to add that as Letting agents - anything that is done by the LA has an annual return to HMRC for ALL landlords. If you are overseas LL then you will be a non resident LL and had NRL tax applied by the Letting Agent unless exemption cert is issued. which is then done quarterly and annually.It is actually an easy thing to spot - if they bother to check. However, not every such transaction gets picked up.
I had a client who had two rental properties for ten years and never declared any rental income in that time. However, as soon as one of the properties was sold, the you know what hit the fan. She was lucky not to go to jail.
I hasten to add, she only asked me to act for her BECAUSE she had already been picked up by HMRC. She was not a client in the period she was failing to declare,
Edited by Eric Mc on Wednesday 22 March 10:06
If you are a DIY LL who is abroad and havnt declared the income and dont have a Exemption cert then the liability falls onto the Tenants to pay the NRL tax to HMRC. Large fines and parties all around if dont comply,
Similar to Eric we had a number of LL come to us AFTER they had been fined by HMRC to manage and look after their properties the right way. So they do check - I donk know the trigger point but some triggers will be other than a sale. Council tax may be one that is getting picked up upon. About 5 years ago it was rare - now more common for it to be picked up on so HMRC have correlated/upped communications somewhere in the chain to pick this up more easily.
Edited by superlightr on Thursday 23 March 09:51
Edited by superlightr on Thursday 23 March 09:51
zbc said:
If you move back into the flat and live there for a while you could avoid all CGT. Beware though as this has to be geniune. This can also be checked.
I think this was stopped, this is from unbiased.co.uk"Historically, letting relief allowed buy-to-let owners to reduce the amount of CGT they owed following the sale of a rented property by up to £40,000, just as long as it had been their main residence at some point. However, the rules changed in April 2020 and effectively removed this relief for buy-to-let landlords. To qualify now, you must have been living in the property at the same time as your tenant(s). Landlords to whom this still applies would typically already qualify for relief under PRR rules."
FriedMarsBar said:
I think this was stopped, this is from unbiased.co.uk
"Historically, letting relief allowed buy-to-let owners to reduce the amount of CGT they owed following the sale of a rented property by up to £40,000, just as long as it had been their main residence at some point. However, the rules changed in April 2020 and effectively removed this relief for buy-to-let landlords. To qualify now, you must have been living in the property at the same time as your tenant(s). Landlords to whom this still applies would typically already qualify for relief under PRR rules."
If a second property (doesn't have to be a buy to let) was once the main residence of an individual, then the Capital Gain on the disposal is reduced in proportion to the ratio of the total time the property was owned versus the time it was the main residence - plus an additional 9 months. This "Main Residence Relief" still exists."Historically, letting relief allowed buy-to-let owners to reduce the amount of CGT they owed following the sale of a rented property by up to £40,000, just as long as it had been their main residence at some point. However, the rules changed in April 2020 and effectively removed this relief for buy-to-let landlords. To qualify now, you must have been living in the property at the same time as your tenant(s). Landlords to whom this still applies would typically already qualify for relief under PRR rules."
If the property had been let commercially at some point (i.e. buy to let), then there USED to be an additional relief (Max £40,000) called Commercial Lettings Relief. That was abolished on 5 April 2020 and no longer applies.
Sorry I was suggesting that you make it your main residence again. Like I said you would have to be serious. Move back in, start renting out your current main residence, live there I would suggest at least a couple of years and then sell it. Any suggestion that you are doing it to avoid tax would invite HMRC attention of course but if you have a legitimate reason, such as a new job then I don't see the issue. Of course, having spent the past 10 years living in your typical PH mansion you may not see the attraction of moving back into your student flat but then you just have to pay up like I've just had too.
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