Question about personal tax allowance on income from house rental

[stevgillamos]

I'm 61 and my wife's 54 and we're considering renting out our London property due to my wife's ill health and wanting some time to ourselves for the forseeable future. We've no mortgage, some savings and our house which is in both our names as joint owners. I've written here before having received various comments about CGT etc., and whether it would be worthwhile due to tax payments, dodgy tenants, other costs incurred etc., My question really is about tax allowance and how it might be utilised in property rental. I believe this allowance is £6,475 each. As joint owners if we doubled this allowance i.e. £12,950 and earned just less than this from our London property e.g. £1,050 p.m. and paid rent on a house e.g. £500 p.m. would we still be eligible to pay any tax (apart from council tax). This 'move' would perhaps be just a temporary arrangement with a view to my eventually getting a job (hopefully) until I reach retirement age and selling the house after a few years of renting it out. Alternatively, we may just sell the house some time this year but I'd like to know options.

[TaxationPete]

If you have no other income then the rental income can use up you personal allowances. The rental of an alternative home does not come into the calculation. The property you have lived in will be free of CGT for 36 months then letting relief will kick in to further offset any CGT up to a maxuimum of £40,000 each so you could be free of CGT for 5,6,7 0r more years depending on what house prices do. Read HS283 on the HMRC web site. Regards Peter

[stevgillamos]

Thanks for your reply Peter. I've had a quick look at the HS283 doc. We bought the house in 1999. However, in 2003 I was offered a job in Spain which didn't work out for various reasons and we came home. We had decided to give it a year but came back within 7 months or so. We just locked the house up and payed a reduced council tax for that time as no-one was living in it i.e. we did not rent it out. Would this count against us in any way when in regard to going against up paying CGT? We were only out of the country for about 5 months in total.

[TaxationPete]

No. Read CG65030. Absence for any period up to 36 months is exempt and any period where you are working abroad as long as you lived in the property prior and post to the absence. Regards Peter

[stevgillamos]

Many thanks Peter