CGT on main residence
Discussion
I seem to have missed the legal changes circa 2015. Am I right to say that letting one's main residence will expose it to a potential CGT payment? In effect I am financially coerced to live in my main residence OR face either a loss in rent (because by letting it would cease to be my main residence) or exposure to CGT. Seems incredibly unfair for those who only own a single property - or have I missed a trick?
For example, a family living opposite my parents have moved from SW London to Coventry for work. That is bad enough in itself - but would they have to pay income tax and CGT on their property (if there are any gains between now and the time of sale)? That is on top of the rent on their new home.
For example, a family living opposite my parents have moved from SW London to Coventry for work. That is bad enough in itself - but would they have to pay income tax and CGT on their property (if there are any gains between now and the time of sale)? That is on top of the rent on their new home.
Edited by fido on Thursday 22 March 10:18
Eric Mc said:
The Main Residence is still exempt from CGT subject to some restrictions.
I guess that is the problem - the rules have tightened up. If I now let my only property out for 18 months - and it is sold at the end of that period then I am subject to CGT. Before 2015 it was 3 years, I think?Some people we rented near got stung for this.
But I think it was still cheaper than having sold and paid fees/stamp duty to sell/buy and then sell/buy again (they rented for about 4 yrs before buying again in a 3rd location)
Could you not do something creative with setting up a business that uses your rental income from yours to pay for your rent, and make a loss and put it against the CGT?
Also costs to sell/fees and so on?
But I think it was still cheaper than having sold and paid fees/stamp duty to sell/buy and then sell/buy again (they rented for about 4 yrs before buying again in a 3rd location)
Could you not do something creative with setting up a business that uses your rental income from yours to pay for your rent, and make a loss and put it against the CGT?
Also costs to sell/fees and so on?
fido said:
Eric Mc said:
The Main Residence is still exempt from CGT subject to some restrictions.
I guess that is the problem - the rules have tightened up. If I now let my only property out for 18 months - and it is sold at the end of that period then I am subject to CGT. Before 2015 it was 3 years, I think?The fact that the property has been "let" does not determine whether it is no longer your main residence. The fact that you don't live in it is what determines whether it is your main residence or not.
HOWEVER, because it was once your main residence AND you have been letting it since you moved out, does mean that another allowance kicks in called "Commercial Lettings Relief".
It has always been the case that if you moved out of your home to live elsewhere, your home ceases to be your "main residence" (it doesn't have to be let out). Even if the new place you moved into was a rented property, the old home ceases to be your main residence.
There are some exemptions available - especially if the reason you moved out was because you were forced to move abroad for work (note the word "forced" rather than "decided").
Edited by Eric Mc on Thursday 22 March 11:37
cbmotorsport said:
Intereted in this. We moved out of our house to rent somewhere bigger after 10 years of living there. We rent it out. CGT hadn't dawned on me, due to it being our only property. Seems really unfair.
Oh bugger, I hope that's not the case. We are planning on renting out our "main residence ", retiring and moving up to Norfolk for a year or so. Might have to have a rethink.
Eric Mc said:
Grandad Gaz said:
Oh bugger, I hope that's not the case. We are planning on renting out our "main residence ", retiring and moving up to Norfolk for a year or so.
Might have to have a rethink.
This is not a "new rule" it has been the case for as long as CGT has existed (1965).Might have to have a rethink.
Grandad Gaz said:
Eric Mc said:
Grandad Gaz said:
Oh bugger, I hope that's not the case. We are planning on renting out our "main residence ", retiring and moving up to Norfolk for a year or so.
Might have to have a rethink.
This is not a "new rule" it has been the case for as long as CGT has existed (1965).Might have to have a rethink.
There is cgt applied to your main residence if you rent it out. But the amount due is pro rated for the amount of time rented out versus the amount of time you lived in it, plus if you rent it out you also get relief off for that. So it only becomes payable when you sell the house and the amount you pay is then calculated and if there are two of you then you get an allowance each of I think 20k.
It isn't actually that onerous, after all it's only a tax on the profit between buying and selling, minus all the allowances plus the costs of buying and selling it plus any major refurb you did.
It isn't actually that onerous, after all it's only a tax on the profit between buying and selling, minus all the allowances plus the costs of buying and selling it plus any major refurb you did.
cbmotorsport said:
Grandad Gaz said:
Eric Mc said:
Grandad Gaz said:
Oh bugger, I hope that's not the case. We are planning on renting out our "main residence ", retiring and moving up to Norfolk for a year or so.
Might have to have a rethink.
This is not a "new rule" it has been the case for as long as CGT has existed (1965).Might have to have a rethink.
keirik said:
There is cgt applied to your main residence if you rent it out. But the amount due is pro rated for the amount of time rented out versus the amount of time you lived in it, plus if you rent it out you also get relief off for that. So it only becomes payable when you sell the house and the amount you pay is then calculated and if there are two of you then you get an allowance each of I think 20k.
It isn't actually that onerous, after all it's only a tax on the profit between buying and selling, minus all the allowances plus the costs of buying and selling it plus any major refurb you did.
Don't conflate "renting out" of your former main residence with whether a property is liable to CGT or not. A property (whether rented out or not) will be liable to CGT if it is not your main residence. The fact that it is rented is not a CGT matter.It isn't actually that onerous, after all it's only a tax on the profit between buying and selling, minus all the allowances plus the costs of buying and selling it plus any major refurb you did.
As I pointed out, renting out a former main residence actually IMPROVES the CGT situation on a former main residence.
We have just put our place up for sale after renting it out since 2012 when we moved out due to my work. (Armed forces)
As I understand it:
-joint ownership so you split the gains in two.
-relief for the period you lived in it plus the 18 months after you moved out plus the last 12 months of owning it
-relief for letting it out which is the same as above or £40k depending which is the lowest.
-plus you get an allowance of c.£11k CGT per tax year.
That’s how I understand it but as our situation is a bit more complicated (wife owned it for 2 years before we took out a mortgage together) I’ll be seeking the advice of my accountant.
As I understand it:
-joint ownership so you split the gains in two.
-relief for the period you lived in it plus the 18 months after you moved out plus the last 12 months of owning it
-relief for letting it out which is the same as above or £40k depending which is the lowest.
-plus you get an allowance of c.£11k CGT per tax year.
That’s how I understand it but as our situation is a bit more complicated (wife owned it for 2 years before we took out a mortgage together) I’ll be seeking the advice of my accountant.
dai1983 said:
We have just put our place up for sale after renting it out since 2012 when we moved out due to my work. (Armed forces)
As I understand it:
-joint ownership so you split the gains in two.
-relief for the period you lived in it plus the 18 months after you moved out plus the last 12 months of owning it
-relief for letting it out which is the same as above or £40k depending which is the lowest.
-plus you get an allowance of c.£11k CGT per tax year.
That’s how I understand it but as our situation is a bit more complicated (wife owned it for 2 years before we took out a mortgage together) I’ll be seeking the advice of my accountant.
You BOTH get the Annual Capital Gains Tax allowance i.e. £11,300 each.As I understand it:
-joint ownership so you split the gains in two.
-relief for the period you lived in it plus the 18 months after you moved out plus the last 12 months of owning it
-relief for letting it out which is the same as above or £40k depending which is the lowest.
-plus you get an allowance of c.£11k CGT per tax year.
That’s how I understand it but as our situation is a bit more complicated (wife owned it for 2 years before we took out a mortgage together) I’ll be seeking the advice of my accountant.
Eric Mc said:
Don't conflate "renting out" of your former main residence with whether a property is liable to CGT or not. A property (whether rented out or not) will be liable to CGT if it is not your main residence. The fact that it is rented is not a CGT matter.
As I pointed out, renting out a former main residence actually IMPROVES the CGT situation on a former main residence.
I think I was agreeing with you?As I pointed out, renting out a former main residence actually IMPROVES the CGT situation on a former main residence.
I don't think the OP is talking about a former but a current main residence.
If a house is at some point not your main residence it does become relvant for CGT, and yes renting it out does help - agreed again :-)
I was just trying to point out it isnt as disastrous as people think
keirik said:
I think I was agreeing with you?
I don't think the OP is talking about a former but a current main residence.
If a house is at some point not your main residence it does become relvant for CGT, and yes renting it out does help - agreed again :-)
I was just trying to point out it isnt as disastrous as people think
I wasn't disagreeing.I don't think the OP is talking about a former but a current main residence.
If a house is at some point not your main residence it does become relvant for CGT, and yes renting it out does help - agreed again :-)
I was just trying to point out it isnt as disastrous as people think
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