Capital Gains Tax for a residence that was let for a period of time

Pimped

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#1
What would be the calculation of the capital gains tax for a freehold property that was owned for 30 years, but was rented for 5? Would there be a tax relief for the last 18 months and then a payment of CGT on the 3.5 years calculated on the rental income?
 

bamber

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#2
What the law actually says is that the final 18 months of ownership is always exempt from CGT, provided that the property has been the owner's principal private residence at some time. So, the period of rental must cover that final 18 months for that additional relief to apply, otherwise the whole 5 year rental period is chargeable. Assuming that the 18 month "bonus" is available, you have to first calculate the gain for the whole period of ownership, then deduct the proportion relating to the 26.5 years which are exempt. What is left may still not be taxable, because Lettings Relief of up to £40,000 is available.

The situation could be different if the owner is not resident in the UK at the time of sale.
 

Pimped

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#3
Thanks @bamber. The tricky part I guess - if the lettings relief does not apply - is to work out what the gain is during the 5 years. Do you think I would have to calculate the estimated property value change over the 5 years, or just work out the income from letting? If the latter, income tax would have already been paid on that

Who works all this out? Is it the conveyancing solicitor, someone else, or do you work it out yourself and submit it as part of your Self Assessment?
 

bamber

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#4
Do not confuse the 18 month "bonus" with the Lettings Relief; they are two separate things. I think you are now saying that the property was not let in the final 18 months, so the exempt portion will be only the 25 years of actual residence, which is five-sixths of the total period of ownership. What you have to do is first calculate the gain over the whole 30 years, then deduct five-sixths of it as exempt. The remaining one-sixth may still be covered by the £40,000 Lettings Relief.

Assuming that the property is being sold now, the gain needs to be declared on your 2018/19 Self Assessment tax return and any tax will be payable in January 2020. However, if you are not resident in the UK, you have only 30 days to declare the gain and pay the tax.
 
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