Consent to Lease residential what are the tax implications?
Discussion
I have been granted permission by my current mortgage provider for consent to lease. I am an IT consultant and will be moving to Scotland for 2 years and didn't want to sell.
This is my only property - I will be renting in Scotland - what are the tax implications of this?
Would I be liable to Capital Gains Tax whenever I come to sell the home? What about tax on the rental during these 2 years?
My accountant is not being too helpful with info and any help from fellow PH'ers would be much appreciated.
This is my only property - I will be renting in Scotland - what are the tax implications of this?
Would I be liable to Capital Gains Tax whenever I come to sell the home? What about tax on the rental during these 2 years?
My accountant is not being too helpful with info and any help from fellow PH'ers would be much appreciated.
Youn will need to sign up for Self Assessment (if you don't already complete a Self Assessment tax return) so that you can provide HMRC with the details of your rental income and expenditure. I would do this even if you are making rantal losses as you may be able to offset the rental losses against any future rental profits.
Once you start renting out a property, it is no longer your main residence so, in theory, could be liable to CGT. However, any gains on the disposal of the property are time apportioned between the period you lived there and the period you didn't - plus you get an additional three years "grace" period added onto the period you lived there. If you rented it out for two years and then moved back in or sold it, those two years when it wasn't your main residence would escape CGT because it is less than the three year "grace" period.
Obviously, if you stay away from the house for more than three years, then an element of the gain will start becoming chargeable to CGT. Don't forget however, that you have a personal CGT allowance of £10,100. If the property is jointly owned, the gain is split between the owners and they each get their personal £10,100 allowance.
It's actually quite hard to pay CGT if you take certain steps.
Once you start renting out a property, it is no longer your main residence so, in theory, could be liable to CGT. However, any gains on the disposal of the property are time apportioned between the period you lived there and the period you didn't - plus you get an additional three years "grace" period added onto the period you lived there. If you rented it out for two years and then moved back in or sold it, those two years when it wasn't your main residence would escape CGT because it is less than the three year "grace" period.
Obviously, if you stay away from the house for more than three years, then an element of the gain will start becoming chargeable to CGT. Don't forget however, that you have a personal CGT allowance of £10,100. If the property is jointly owned, the gain is split between the owners and they each get their personal £10,100 allowance.
It's actually quite hard to pay CGT if you take certain steps.
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