Moving out of main residence

[drmaxell]

Good day to all: Can someone help me on ths?
I have been living in my main and only residence (A) since 1995, bought for £100K and now £300K. About to buy (B) for £300K by extracting equity from (A). I wish to live in (B) for 1yr or so and let it out before moving back into (A) which will have someone living in it but not rented. Is this a sensible move from CGT prospect if I was to sell both in 10 years time? Or is it better to rent out (A) and live in (B).

Cheers

[Tax Accountant]

Good day to all: Can someone help me on ths?
I have been living in my main and only residence (A) since 1995, bought for £100K and now £300K. About to buy (B) for £300K by extracting equity from (A). I wish to live in (B) for 1yr or so and let it out before moving back into (A) which will have someone living in it but not rented. Is this a sensible move from CGT prospect if I was to sell both in 10 years time? Or is it better to rent out (A) and live in (B).

Cheers

It is very sensible to occupy each property you own as your only or main residence at some time in your ownership and also to let it at other times. This will qualify you for CGT for the PPR relief for the actual period of ownership, PPR relief for the final 3 years of ownership even if let during some or all of those final 3 years, and lettings relief UPTO a maximum of £40,000 per each joint owner.

Ideally, you do not need to live in the property during the final 3 years as these will automatically qualify for CGT exemption provided it has been your only or main residence at sometime beforehand.

I hope this helps.

Ramnik

[drmaxell]

Thanks very much, I guess I was wondering if it is worth loosing the year of PPR in (A) although that does give me 3 years extra PPR in (B). If (A) has been my only residence then the CGT is very straightforward. But by moving out for a year and then renting it out later as well, I'll have to perhaps do some digging for the improvements and renovation expenses incurred whilst owning (A) for 20 years. Is that the general experience?

[maaz-man]

It is very sensible to occupy each property you own as your only or main residence at some time in your ownership and also to let it at other times. This will qualify you for CGT for the PPR relief for the actual period of ownership, PPR relief for the final 3 years of ownership even if let during some or all of those final 3 years, and lettings relief UPTO a maximum of £40,000 per each joint owner.

Ramnik

Ramnik,
Just to get a clear understanding:
does that mean if someone owns and lives in their home for 7 years then rent it for 3 years, they can get releif for all 10 years? or does the final 3 yrs replace the 100% relief? and if all 10yrs are CGT exempt, then the 40% lettings relief will not apply - ?

Cheers.

[Tax Accountant]

Ramnik,
Just to get a clear understanding:
does that mean if someone owns and lives in their home for 7 years then rent it for 3 years, they can get releif for all 10 years? or does the final 3 yrs replace the 100% relief? and if all 10yrs are CGT exempt, then the 40% lettings relief will not apply - ?

Cheers.
You get relief for all 10 years.

If there is no chargeable gain, then you do not need ant lettings relief, taper relief or annual exemptions etc.

If you occupied for 7 years and then let for 4 years, you will have 1 year chargeable out of 11 years. Chargeable gain is calculated on time apportionment basis. Therefore, 1/11th of total gains (after indexation relief) is chargeable. However, you will then reduce the chargeable gain by lettings relief, taper relief and annual exemption.

The long and the short of all this is that if you have occupied the property for a few years and also let for a few years, in most probability any chargeable gains will be largely, if not fully, covered by various allowances, exemptions and reliefs.

Ramnik

[Tax Accountant]

Thanks very much, I guess I was wondering if it is worth loosing the year of PPR in (A) although that does give me 3 years extra PPR in (B). If (A) has been my only residence then the CGT is very straightforward. But by moving out for a year and then renting it out later as well, I'll have to perhaps do some digging for the improvements and renovation expenses incurred whilst owning (A) for 20 years. Is that the general experience?

Losing a year of PPR on the 1st property is not worth worrying about. Basically, you will have chargeable gains of 1/20ths of total gains after indexation.

However, this one year will be more than covered by other reliefs and exemptions available as explained in another reply in this thread, namely lettings relief, taper relief and annual exemption.

In fact, you will not need to worry about CGT even if you have an absence of a lot longer than 1 year on property A.

Ramnik

[drmaxell]

Thanks once again Ramnik. Actually I also have 18 months unoccupied to add before first occupying due to major extension etc. Will the taxman be flexible to this or they are strict about the 12 months initial allowance?

cheers

[Tax Accountant]

Thanks once again Ramnik. Actually I also have 18 months unoccupied to add before first occupying due to major extension etc. Will the taxman be flexible to this or they are strict about the 12 months initial allowance?

cheers
In future, if you post any queries, please set out all facta alltogether rather than in bits and pieces.


Inland Revenue states that in exceptional circumstances, they may allow you a longer period (upto a total of 2 years).

Best to write to them now explaining all the facts and seeking a ruling from them so you know where you stand with them in this respect.

Ramnik

[Tax Accountant]

You get relief for all 10 years.

If there is no chargeable gain, then you do not need ant lettings relief, taper relief or annual exemptions etc.

If you occupied for 7 years and then let for 4 years, you will have 1 year chargeable out of 11 years. Chargeable gain is calculated on time apportionment basis. Therefore, 1/11th of total gains (after indexation relief) is chargeable. However, you will then reduce the chargeable gain by lettings relief, taper relief and annual exemption.

The long and the short of all this is that if you have occupied the property for a few years and also let for a few years, in most probability any chargeable gains will be largely, if not fully, covered by various allowances, exemptions and reliefs.

Ramnik

Just to add to the above.

Absences for whatever reason, totalling not more than 3 years in all, are also exempt provided:

'you do not have another dwelling-house eligible for relief at the same time, and, both before and after each period of absence, there is a time when the dwelling-house is your only or main residence.

But this will not apply to you because you would have moved into the 2nd house which then qualified for PPR.

Ramnik

[drmaxell]

Wow you are a fountain of knowledge.:cool:
Thanks

[Tax Accountant]

Wow you are a fountain of knowledge.:cool:
Thanks
You are welcome.

Ramnik

[Jacob Oliver]

I posted a question recently bUt I think it went to the wrong thread

I own a house which is spilt into 2 levels. Each level has one self contained flat.
I have lived in the first flat as my own residence for about 18 years
I have rented the ground floor flat for about 10 years

It is my intention to move to the Ground Floor flat for about eighteen months while upstairs is being refurbished. Then I intend selling both flats and purchasing one own residence for myself

Is there anyway I can reduce CGT by doing the above or is this there another scenario which would reduce CGT

[Jacob Oliver]

I posted a question recently bUt I think it went to the wrong thread

I own a house which is spilt into 2 levels. Each level has one self contained flat.
I have lived in the first flat as my own residence for about 18 years
I have rented the ground floor flat for about 10 years

It is my intention to move to the Ground Floor flat for about eighteen months while upstairs is being refurbished. Then I intend selling both flats and purchasing one own residence for myself

Is there anyway I can reduce CGT by doing the above or is this there another scenario which would reduce CGT
:confused:

[Tax Accountant]

I posted a question recently bUt I think it went to the wrong thread

I own a house which is spilt into 2 levels. Each level has one self contained flat.
I have lived in the first flat as my own residence for about 18 years
I have rented the ground floor flat for about 10 years

It is my intention to move to the Ground Floor flat for about eighteen months while upstairs is being refurbished. Then I intend selling both flats and purchasing one own residence for myself

Is there anyway I can reduce CGT by doing the above or is this there another scenario which would reduce CGT
:confused:

Your post has gone to the Investment & Finance section where it has now been replied by me.

Ramnik