Selling a house which is rented and capital gain tax

[Welshbeef]

Not sold or for sale yet and might not do for some time.

Question is if you buy a house and live in it and sell it it is your sole property no capital gains tax.
If you buy a house to rent out and never live in it then the bought price less buying and selling costs less any improvement costs will give you your capital gain which is then taxed. Of course you have the £10k per person capital gains allowence so for us that would be £20k

What if you buy a house live in it for x years then move out and rent it for x years.
Clearly the bought price isn't relevant as far as I'm concerned as it should be Market value on the day you move out. The thing is if you never had it valued but on right move there are identical houses in same condition in same street could you use that as the starting point? Of course any improvements made as abode are deductible.

[Countdown]

You should be able to use reasonable assumptions (such as other house prices) for calculating Market value.


If in doubt HMRC will check the way you have calculated MV (see link below).

http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm#3

[smartie]

Mid term values are irrelevant really.

The gain is still calculated on the selling price, less the purchase price and taking the relevant selling fees etc into account.

Basically, you get an exemption for the time you lived there plus 3 years. If you owned a house for 10 years and lived in it for 2 you would therefore be liable to half of the actual gain (ie 2 years+3 years / 10 years ownership) then less your annual CGT allowance.

[Welshbeef]

Is it full years or months?



Also where is that section in the self assessment? Last capital gain I had I cannot recall that

Edited by Welshbeef on Sunday 24th July 14:44

[Eric Mc]

Days.

HMRC expect you to be able to calculate the relevant periods based on days.

It's not that hard, actually, as all the dates should be avilable if you have kept the legally required records.

[Welshbeef]

Wellthis one is simple enough.
Bought in 2001sept
Lived there until sept 2005
Rented ever since
Total time 9 years 11 months so 119 months

I have the exact dates as per right move sold prices as thats when I moved in and rented out.

So I lived there for 60 months and from my understanding I also need to add on 36 months so 96 months are to be excluded.

Also all the capital expenditure happened after I moved out and it was rented - have all the receipts.

So would I be correct in saying

Sold price
Less bought price
Less buying costs
Less selling costs
Less 2x c£10k capital annual allowance
Less new kitchen
Less new bathroom
Less all new double glazing
Less new flat roof
Less new drive
Less new front wall
Less soffix
Less rewire

I think all of the above means zero capital gains tax.

Hmmm makes me thunk maybe I shouldn't think about selling anytime soon after doing all the big ticket items for someone else to benefit from. Although the hassle free aspect is appealing - make that very appealing plus a very nice chunk off of our mortgage.

[Eric Mc]

Don't forget you can claim for all the legal fees incurred in selling and buying the property as well.

Is the property jointly owned?

[Welshbeef]

Eric Mc said:

Don't forget you can claim for all the legal fees incurred in selling and buying the property as well.

Is the property jointly owned?

No but I am married.

I bought it long before meeting the wife and have never changed it. In which case is it worth changing or would that only change going forward capital gains?

[Eric Mc]

Having the house in joint names would double the Capital Gains Tax allowances available when it is disposed of.

As you are married, you can gift a 50% share of the property to her at no risk of Inheritance Tax or Gift Tax being levied.

[smartie]

Eric Mc said:

Having the house in joint names would double the Capital Gains Tax allowances available when it is disposed of.

As you are married, you can gift a 50% share of the property to her at no risk of Inheritance Tax or Gift Tax being levied.

But you need to get your solictor to do this formally (on deeds etc) before the final sale goes through.

[Eric Mc]

Of course.