Capital Gains Tax
Discussion
I moved house a few months ago, and due to not been able to sell my current house quickly enough, decided to rent it out. The rent doesn't cover the mortgage and as its 120 years old its a bit of a pain keep going back once a month to spend a day tending to it. I plan on selling it in the near future but wondered if anyone can tell me where I stand on capital gains tax. I obviously don't want to pay it so how long to I have to sell the house before it kicks in? Any official proof to back up your answer would be greatly appreciated :)
If you rent a place out, the last 3 years don't count IIRC (see an accountant to make sure) so you should be fine
After that you're liable to pay for the percentage of time it was rented, so If you lived there for 10 years, reanted it out for 5, you'd have to pay tax on 1/3 of the caital gain (less all your allowances)
After that you're liable to pay for the percentage of time it was rented, so If you lived there for 10 years, reanted it out for 5, you'd have to pay tax on 1/3 of the caital gain (less all your allowances)
Kentish said:
Does anyone know if there's threshold for CGT?
For example if anyone benefitted from a property sale which hadn't been the main residence at all and made for sake of argument £25k, would that sum be subject to CGT?
yes it would, but you could offset this against your annual CGT allowances and potentially your partners, plus there are indexed allowances you can offset against. Search on motley fool or the times telegraph property sections, there are lots of articles on this. Or speak to an accountant.
Might be worth you nominating it as your primary residence for a month or two though.
ledger said:
If you rent a place out, the last 3 years don't count IIRC (see an accountant to make sure) so you should be fine
if it was once you primary residence, which in this case it was. So you should be ok for 3 years.
Ahh but that doesn't always hold true - if you bought a property, lived in it for a couple of months and let it out and sold 3 years later a a huge gain - HMRC could come sniffing around on the basis that the motive was not for the house to be your prinicipal private residence and deny relief. In your case that doesn't seem to apply!
ledger said:
Does anyone know if there's threshold for CGT?
For example if anyone benefitted from a property sale which hadn't been the main residence at all and made for sake of argument £25k, would that sum be subject to CGT?
yes it would, but you could offset this against your annual CGT allowances and potentially your partners, plus there are indexed allowances you can offset against. Search on motley fool or the times telegraph property sections, there are lots of articles on this. Or speak to an accountant.
Might be worth you nominating it as your primary residence for a month or two though.
Thanks ledger, that's helpful info.
The reason I ask is that my parents bought a house with their own money and have been repaying the mortgage which was in a trustees name.
Trustee sees this as an opportunity to make substancial fast cash after 6 years of having not contributed anything and does the dirty on those paying and living at the property, this initially was an eviction order.
My relative fought this and it went to mediation and it was agreed that the trusteee should get 40% share of the equity now or in the future, whilst my relative remains living there and paying for everything as has been the case since day 1.
This is a bit unfair as trustee doesn't have to pay 40% of mortgage or any repairs or improvements but will still get 40% share of future gains by any enhancments made, anyway that's an aside.
What I'm encouraging relative to do is sell after propery has been transferred into their name and mortgaged in their name and then previous trustee will get 40% of current value.
Then relative can tip off the tax man for trustees recent windfull share and also for not having declared income from property (mortgage repayments paid through trustees account by relative) so could be regarded retrospectively as rent.
Basically, this trustee is a chancer and has cost my relative not only 40% of the equity but some £12k of legal expenses in fighting the trustee. I'd rather the taxman get the trustees windfall than them benefit from their ill gotten gains.
Does that sound possible?
How the hell did they get into such an awkward position in the 1st place? If this trustee is effectively guarranteeing the mortgage as your folks couldn't get a lender to touch them in the first place for whatever reason, perhaps they're arguably entitled to some benefit from the sale - presumably the mediator thought so, anyway?
pdV6 said:
How the hell did they get into such an awkward position in the 1st place? If this trustee is effectively guarranteeing the mortgage as your folks couldn't get a lender to touch them in the first place for whatever reason, perhaps they're arguably entitled to some benefit from the sale - presumably the mediator thought so, anyway?
It was to do with their ages (retired) and they'd have had to put down a bigger deposit.
I agree that the trustee is entitled to something but not the 100% that they were trying to get with an expedited eviction order, nor should teh trustee get anywhere near the 40% which equates to approx 50% currently being argued (taking into account further expenses the trustee is refusing to pay in the future).
The trustee has had some responsibility/risk but that was insignificant as there is a 70% positive equity in the property. You must also bear in mind that the trustee hasn't had any financial input (none at all) into the property.
Gassing Station | The Pie & Piston Archive | Top of Page | What's New | My Stuff