CGT - Living back in a once rented BTL house

[uuf361]

I remember years ago when Istarted renting my houses out that if you moved back into a once rented house and it bcame designated as your PPR that then if you subsequently sold it you were no longer liable for any CGT. I think this period used to be 6 months.

Anyone know if that still exists as can't find much info about it..... ?

With the impending massive hikes in CGT any way to minimise the tax is worth considering......

I suspect now the onus would be on you to prove you had nto moved back into that property for the purposes of avoiding CGT (i.e. that you sold another former PPR at the same time as moving back into the BTL......)

[hidetheelephants]

uuf361 said:

I remember years ago when Istarted renting my houses out that if you moved back into a once rented house and it bcame designated as your PPR that then if you subsequently sold it you were no longer liable for any CGT. I think this period used to be 6 months.

Anyone know if that still exists as can't find much info about it..... ?

With the impending massive hikes in CGT any way to minimise the tax is worth considering......

I suspect now the onus would be on you to prove you had nto moved back into that property for the purposes of avoiding CGT (i.e. that you sold another former PPR at the same time as moving back into the BTL......)

This article seems to say 3 years, but it's a bit complicated. It made my head hurt reading it.

[uuf361]

Cheers - that is a bit of a read!

[LC23]

http://www.hmrc.gov.uk/cgt/property/sell-own-home....

You'll want to take a look at this. The 3 years refers to last 3 years of ownership where you have lived in the property at some point as your PPR (that is the last 3 years are exempt). There is also relief for periods where the property is available/being let.

[auditt]

Has milliband (one of them) been accused of this, flipping propertys.......

[Welshbeef]

I know the three year rule well were selling one of ours soon result will be hopefully a nice gain of £60k but due to that rule there will be no cgt to pay

[uuf361]

Welshbeef said:

I know the three year rule well were selling one of ours soon result will be hopefully a nice gain of £60k but due to that rule there will be no cgt to pay

3 year as in the last 3 years of deemed occupation or you have moved back in for 3 years to eradicate the CGT liability ?

I have 2 BTL's and have no desire to sell just yet but am exploring whether there's anything I should be doing now to protect myself......

One I could easily move back in to but the other I think the tenant will eventually want to buy so that would be more difficult.

[Welshbeef]

Have lived there so the three year rule is due to time the place has been let.
I cannot see it going up in value any more it's at the £250k mark now rates are only going one way and recently there has been a little too much crime in that area which I cannot see improving hence want out and am going to use the upside to dump into the offset mortgage for now and probably pay for a nice extension or loft conversion.

[uuf361]

Very good - sadly mine not so simple, one I've never lived in and it's been rented for 9 years........................

[Welshbeef]

uuf361 said:

Very good - sadly mine not so simple, one I've never lived in and it's been rented for 9 years........................

remember you can combine your cgt allowence with your wife so that's an extra £10k tax free.

I've lived in all of mine as in buy one live in it for a while then rent alway upgrading and clearly always buying somewhere I like. Am offloading one which I feel is toppy and am mindful of the crime increase hence get rod now

[Welshbeef]

News this morning is the cgt allowence c£10k may well be reduced along with increasing the rate inline with income tax, but taper relief could well come back plus the abolishing of hipps. Sadly I may have to pay the hipp as want rid sooner than later

[uuf361]

Welshbeef said:

uuf361 said:

Very good - sadly mine not so simple, one I've never lived in and it's been rented for 9 years........................

remember you can combine your cgt allowence with your wife so that's an extra £10k tax free.

Ah, just my allowance to use, no wife, so all on me, and if they reduce it even further this is not going to help.....I do wonder though whether this will be a pernmanent feature as to me it seems a little un-conservative like......

[Welshbeef]

Well we can only wait and see what happens on the 22 June but the strong message is CGT will go up & possibly linked to Income tax & as today the tax free allowence will decrease, basically its set like this for those who are 50% tax payers to pay their "fair" share.

Personally provided I sell in time from a house situation I'll not care... until I want/need to sell another...

There was also the message about taper relief in which case that drives longer term investment as opposed to flipping.

[rfisher]

I don't understand the last 3 years thing.

If you rent out a house that you once lived in for more than 6 months as your main residence, as far as I see it, you never pay CGT on it when you sell.

Or does it mean that you have to have lived in that particular house as you main residence within the last 3 years?

In that case what happened before the last 3 years (whether you lived in it or not, whether it was rented out or not) makes no difference - no?

Bleedin' HMRC. Deliberatly complicating things.

[LC23]

rfisher said:

I don't understand the last 3 years thing.

If you rent out a house that you once lived in for more than 6 months as your main residence, as far as I see it, you never pay CGT on it when you sell.

Or does it mean that you have to have lived in that particular house as you main residence within the last 3 years?

In that case what happened before the last 3 years (whether you lived in it or not, whether it was rented out or not) makes no difference - no?

Bleedin' HMRC. Deliberatly complicating things.

If you have lived in a house at some point as your PPR, then the last 3 years are automatically deemed a period of PPR exemption. You do not have to move back in to the house at all.

[Welshbeef]

Say in the scenario you buy a house as your main residence then after x period no limit on min stay..so open to ambiguity i.e. I lived there for 1 day and my circumstances changed so I moved & bought another..

Anyway then you rent it for 35months then you sell it in that case CGT = nil. If they stay for 37 months then you are liable for CGT from the moment you left as main residence up to the point of selling. Again oh it was worth £k when I moved out barely any gain/within allowences....

Or another scenario is you live there move out for 36months then move back in then back out etc etc... basically = no CGT.

[uuf361]

Really complicated- think I might need to get a tax advisor come the end of June, as if the capital needs to apprecaite by more than 30% to cover the extra CGT to pay then it will be best to get out now (and indications seem to be that it will come in April 2011)........shame for me, and for the then homeless tenants.........

[LC23]

Welshbeef said:

Say in the scenario you buy a house as your main residence then after x period no limit on min stay..so open to ambiguity i.e. I lived there for 1 day and my circumstances changed so I moved & bought another..

Anyway then you rent it for 35months then you sell it in that case CGT = nil. If they stay for 37 months then you are liable for CGT from the moment you left as main residence up to the point of selling. Again oh it was worth £k when I moved out barely any gain/within allowences....

Or another scenario is you live there move out for 36months then move back in then back out etc etc... basically = no CGT.

I don't think you are quite understanding how the last 3 years rule works. You can't keep moving in and out to give yourself 3 exempt years every time.

Lets say you buy a house and move in for a year as your PPR. You then move out and let the property for five years, then move back in for a year as your PPR, then move out again and let it for four years then sell it.

You work out the total gain arising and then establish your exempt periods. In this example it would be the first year, the further year you move back into the property and the final 3 years of ownership. There is also relief for the periods you are letting the property (the 5 years plus 1 year of the final 4 year letting period as the final 3 years are covered by the "final 3 year rule" anyway). You need to consider the letting relief rules to establish how much relief you are entitled to for the letting periods. You then consider any CGT annual exemption available to you.

I'll also add to this that the above does not take into account issues such as you not being able to occupy the property due to living abroad or living in another part of the UK as there are further rules and exempt periods to consider for this.

Edited by LC23 on Thursday 20th May 13:25

Edited by LC23 on Thursday 20th May 13:27

[rfisher]

Thanks for the posts but I'm still confused.

Anyone seen Eric?

What happens if you nominate that property as your main residence?

Am I correct in thinking that it then does not attract CGT regardless of being rented out, unoccupied or lived in by the owner?

Is it otherwise necessary to tote up the number of months you lived there, the number of months it was unoccupied and the number of months it had a tenant in it?

Is there a CGT formula to feed those figures into.

Help!

[LC23]

You can't just elect for a property to be your PPR. It must actually be your main residence. Generally speaking, you live in it! If it is always your PPR then no CGT at all.

If you have two or more properties and you live in both (say a flat in London and a country retreat) then you need to consider which one is your PPR and make an election. If you have two properties and you clearly only live in one of them (say due to the fact the other is let) then that is automatically your PPR. You cannot elect for a property to be treated as your PPR if you don't/cannot occupy it.

If a property has not always been your PPR then you need to work out how much of the gain is exempt. Periods where you live there are autmoatically exempt. The last 36 months are exempt where the property has at some point been your PPR. Periods where the property is let/available to let also attract an exemption of the lesser of -

£40000
The portion of the gain arising during the letting period
The gain exempt as it is your main residence (including the last 36 months)

This gain is usually calculated on a straight line basis. So you don't have to calculate the gain based on the market value when you lived there, when you move out etc. etc. You just look at the market value at date of sale versus the purchase price plus any capital improvements (eg,extension).

http://www.hmrc.gov.uk/helpsheets/hs283.pdf - this is useful

Edited by LC23 on Thursday 20th May 14:51