Tax charges for renting a house

[bobby1]

Hi,

I'm looking for advice regarding renting out my home.

I have rented out my house and purchased another about 100 miles away for my job.

It has been let out now for 11 months. I rent it out for £630 and the interset on the mortgage is £450 mortgage / month. Like SteveD in another post I would have liked to have sold, but no takers, would i need to sell before the 3 years is up so not to pay CG tax, here are a few details:

House Purchased in 21/12/2003
Cost £180k
Sale price ££220 ish!
Was main residence from 21/12/2003 until 01/06/2008
Rentalstarted in dec 2008 and receive £630 per month

What I would like to know is that would I be liable for the full CGT if I sell after 3 years?

Can I also put any expenses down for the tax year 2008/9?
For example when the house was uninhabited:
- when i travelled the 200 mile round trips to maintain the garden during the period the house was being advertised to let/sell
- the council tax, insurance etc that i paid whilst the house was being advertised to rent/let
- any other expenses?

Any advice appreciated,

Bob

[TaxationPete]

Do not get hung up about CGT if you did have to pay 18% CGT means that you made 82%. However As this was your PPR then, yes, PPR relief will apply for 36 months then lettings Relief will kick in for upto a max of £40,000 per owner so it could be 5,6,7 or if you are married and joint owners then 7,8,9 or more yeras depending on what house prices do in the future. The costs prior to actually letting the property are not deductible nor is the mileage.

Allow me to give you an example. The house remains rented out until 14/12 2014 is only in your name and is sold for £350,000 :

Capital Gains Summary

Purchase Price £180,000 21/12/2003
Legal Fees £0
Sale Price £350,000 14/12/2014
Enhancements £0
Legal Fees £0
Gross Gain £170,000
PPR Relief £115,496 £54,504
Letting Relief £40,000 £14,504
CG Allow'ce 1 £10,100 £4,404
CG Tax Bill £793

That's not a lot of tax to pay on your investment is it ? Regards Peter

[TaxationPete]

If you want other examples, dates or values then ask me today while I keep your spread sheet open. I do not save them. Regards Peter

[bobby1]

Thanks for the info Pete.

A couple of things I'm unsure of because I have never let my house before are:

1) I thought CGT was 40% so if I sold my house (in my name only only as I'm not married) then this % waould go to the taxman. Is that right or is it 18%?

2) What is letting relief? Is it that if I rent my house for 3 years the PPR relief will be extended somehow for 5,6, or 7 years? the politicians in this country have been 'flipping' houses routinely. Would I be able to do this if the tenants left and if I could would the PPR relief be reset if it was within chaning my PPR?

3) Also,

Sorry for my ignorance.

Regards,

Bob

[TaxationPete]

CGT was flat rated to 18% and is no longer based on your marginal tas threshold which it use to be.
Letting relief is granted, assuming you are declaring the rental income to HMRC, for each day the house is rented out. This relief is the gain main on the property divided by the number of days you have owned it times the number of days it was actually rented out limited to £40,000 per PPR qualifying owner. Read IR283 on the HMRC web site and associates links. This is not an extention to PPR it is a relief that only kicks in after PPR. Moving back in does nothing for you except slighly modify the PPR apportionment by the additional period. Add to this you have to not own another home that attracts PPR, then there is very little mileage in doing that. Regards Peter

[bobby1]

many thanks for the info.

Bob

[outtahere]

Do not get hung up about CGT if you did have to pay 18% CGT means that you made 82%. However As this was your PPR then, yes, PPR relief will apply for 36 months then lettings Relief will kick in for upto a max of £40,000 per owner so it could be 5,6,7 or if you are married and joint owners then 7,8,9 or more yeras depending on what house prices do in the future. The costs prior to actually letting the property are not deductible nor is the mileage.

Allow me to give you an example. The house remains rented out until 14/12 2014 is only in your name and is sold for £350,000 :

Capital Gains Summary

Purchase Price £180,000 21/12/2003
Legal Fees £0
Sale Price £350,000 14/12/2014
Enhancements £0
Legal Fees £0
Gross Gain £170,000
PPR Relief £115,496 £54,504
Letting Relief £40,000 £14,504
CG Allow'ce 1 £10,100 £4,404
CG Tax Bill £793

That's not a lot of tax to pay on your investment is it ? Regards Peter

Hi Pete, I like your clear and concise example and especially the point about making 82% gain rather than focusing on tax. Using that same example, how would it work if you have a married couple joint owning the property. Surely it is not as easy as taking the 40k max letting relief twice is it?

I am currently running through some scenarios for my own situation and the threads you have contributed to have been helpful

[TaxationPete]

The Letting Relief will double and the Capital Gains allowance will double. Everthing else is the same. I assume you are both declaring the rental income. If you want to disclose your figures then I will run the numbers for you or PM me. Regards Peter