CGT - Primary Property - Letting

[Landlord9467]

Hello,

I hope someone can offer some assistance.

1 - A LL has only one property.
2 - They rented it out over the last few years.
3 - They moved back in earlier this year.
4 - They want to sell in the near future.

What is the best course of action to avoid CGT?

Many thanks!

[TaxationPete]

You make it sound if they lived there originally. Please provide dates, at least MMM/YYYY and value at purchase, date of first tenant and the date they moved back in ans est sale value. Is the property solely or jointly owned. Regards Peter

[Landlord9467]

You make it sound if they lived there originally. Please provide dates, at least MMM/YYYY and value at purchase, date of first tenant and the date they moved back in ans est sale value. Is the property solely or jointly owned. Regards Peter

Hi Pete,

Thanks for showing an interest.

The LL moved in mid 2004 and stayed there until early 2007. Thereafter it was let out until mid 2010 after which the LL moved back in. The LL is the only owner and the property was bought for 1.2m in 2004 and is expected to fetch 2m in the current market.

Many thanks!

[TaxationPete]

Based on your extremely loose dates there most probably will be no CGT liability due to PRR and Letting Relief. Read HS283 on the HMRC web site. May I ask why the owner moved out. Was this for work reasons, and if so was the work/job in the UK or Abroad. Regards Peter

[Telometer]

I'm sorry, but on the facts given you are not correct. (You also need to ask whether, if indeed he did move elsewhere for work, he owned the property he was living in.)

Assuming a sale in early 2011,

The property has been owned for 6.5 years, so a gain of 123k p.a. 1 year of this is taxable - (early 2007 - early 2008), less 40k letting relief and 10k annual exemption (assuming that hasn't been used elsewhere), tax thus due on 73k.

If the property is jointly owned with a spouse (OP - is it?) the taxable gain is reduced by a further 50k.

The sooner the property is sold - even if OP continues to live there - the lower the tax bill.

[TaxationPete]

I ask about detachment for work/job as if this was in the UK then the gain is exempt for 4 years and if abroad then it is exempt for the duration. Regards Peter

[Phlash]

Agree with the below.


I'm sorry, but on the facts given you are not correct. (You also need to ask whether, if indeed he did move elsewhere for work, he owned the property he was living in.)

Assuming a sale in early 2011,

The property has been owned for 6.5 years, so a gain of 123k p.a. 1 year of this is taxable - (early 2007 - early 2008), less 40k letting relief and 10k annual exemption (assuming that hasn't been used elsewhere), tax thus due on 73k.

If the property is jointly owned with a spouse (OP - is it?) the taxable gain is reduced by a further 50k.

The sooner the property is sold - even if OP continues to live there - the lower the tax bill.

[Gordon999]

The CGT tax bill on 73K gain charged at 28% is about 20K. The selling estate agent's commission may be more than this.

[TaxationPete]

Yes I agree with Telometer but guessing at the dates is not my thing and we need to know why the owner left the property and did he own another property in which he lived. Regards Peter

[Phlash]

Yes I agree with Telometer but guessing at the dates is not my thing and we need to know why the owner left the property and did he own another property in which he lived. Regards Peter

To be fair he didn't guess at the dates. He used the OP's information given, stated his assumption made, and gave the likely conclusion thereon. Perfectly normal practice.

Getting picky, you made the guesses. "there most probably will be no CGT liability". You guessed at the probability of meeting further conditions - far more of an assumption, and not even stated/declared in the reply. I guess that kind of post is not Telometer's "thing".

[Telometer]

I ask about detachment for work/job as if this was in the UK then the gain is exempt for 4 years and if abroad then it is exempt for the duration. Regards Peter

Not necessarily so. ONLY if he didn't buy somewhere else that was his PPR during that period. Without that bit of information your advice, sorry guess, is less useful than not writing anything at all.


The CGT tax bill on 73K gain charged at 28% is about 20K. The selling estate agent's commission may be more than this.

I'd be surprised if selling fees are more than 3.65%. Anyway, even if they are only (broadly) 1/6.5 of the selling fees will be deductible. Therefore in order to reduce the tax bill to nil the fees would have to be almost 25%.


Yes I agree with Telometer but guessing at the dates is not my thing and we need to know why the owner left the property and did he own another property in which he lived. Regards Peter

So on what basis did you say that no tax would be due. Very dangerous indeed (but no surprise).

[TaxationPete]

You clearly missed post#9
"and did he own another property in which he lived." Regards Peter

[Gordon999]

Based on a sale price of 2 mil, I estimated the estate agent' s commission ( rate charged at 1 - 2% of SP ) may come to 20k-40K ( as compared to the calculated 20K tax bill ). -

I don't understand why you say " to reduce the tax bill to nil, the fees would have to be almost 25%".

[Telometer]

Happy to explain, but firstly what do you think that estate agent's fees of 40k will do to the tax bill?