Any Help regarding renting and captial gains tax???? ARGH!!!

[shoemake21]

Right people,

Im totally new to this, so any help would be greatly appreciated. Basically back when i was 18 (2001), I bought my first house, have renovated it etc and it was bought for £41,000 (mortgaged too), have done alot of work to it (spent about 20k) and now its worth today somewhere in the region of 100k. Happy days. I then met my partner in 2007 and he decided to buy a place on his own in Nov 2008 (71k). We've been renovating this propery ever since for a home that we could both move into and have spent about 30K so far on the work. We got married in Aug 2009, and have been looking forward to moving into the new home and selling what is now OUR old home ever since.

The work is nearlly completed and we were hoping to move into the new home in about 2 months, but with the market being soo bad at the mo, we are thinking about renting the old house out. But have been trying to make heads or tails out of the capital gains thing to no avail. Basically, what im trying to say is, im almost sure that we'd be expempt from capital gains tax as the old house is our main home, has been for me for 8 years etc and i have all the bills etc to prove it. But if i decided to rent it out for say 3 years until this market improves, would i then loose this benefit as i will be moving to a new house which would then be considered my main house of residence.

If anyone could help or advise, it would be greatly appreciated, as i just dont know whats best to do. His brother has asked us if he could rent our old house of us short term, so it would be perfect, but i dont want to be penalised then as its not really for a long term business venture, i just dont want to loose as much equity as i am at the mo with the recession.

Like I said, if anyone could offer any help or advice, it would be greatly appreciated, im sooooo confused, i dont know whats best!

Thanks all, and thanks for reading x x x x x

[Telometer]

So you currently live in the 41k house, together with your husband?

If you rent it out now, then if:

1. You sell within 3 years there is no CGT to pay ever.
2. You sell it after 3 years then provided the gain [=proceeds minus (cost plus refurbishment costs)] multiplied by [(years owned minus 13)divided by (years owned)] is less than 50k then there is no tax.

Put it into joint names BEFORE moving out and then it is 100k not 50k.

I doubt you will ever pay CGT if you hold the property for 20 years.

[shoemake21]

Thanks so much for such a quick reply. Yes, we both live there at present, but the house is soley in my name, previous name before marriage. The only thing is, i have a mortgage on this property, he on the other, i wasnt sure if i could put his name on my house if you get me as i thought you could only have one mortgage. Soooooo complicated this stuff is! lol! Thanks again hun x x x x

[shoemake21]

Plus the house was bought for 41k, worth now 100k, thus i have about 60k profit in it, if that makes sense x

[jeffrey]

he house is soleLy in my name, previous name before marriage. The only thing is, i have a mortgage on this property, he on the other, i wasnt sure if i could put his name on my house if you get me as i thought you could only have one mortgage.
As to who owns the house, the decision re whether H can be a joint mortgagor (borrower) on the house will rest with the mortgagee. You'd need its consent to transfer from 1 name to 2.

[Telometer]

Bought 40, 20 spent on refurb, now worth 100. You have 40k profit in it (from a CGT - and indeed any other - perspective). Not 60k.

What counts for CGT is beneficial ownership, and you can give him 50% beneficial ownership without having to change the names on the deeds - go and see a solicitor. Not sure what a mortgage company would say about that.

[TaxationPete]

If you rent the property out the costs of the refurbishment can be used in any future CGT calculation so that you property looks at though it was worth £61,000. Read HS283 and you will see that the period you actually live there and the last 36 months is free of CGT. Then Letting relief will apply up to a maximum of £40,000 to further offset the gain. This may leave your property free of CGT got 6,7,8 or many more years, depending on what house prices do.
If you are married and still living in the property ( you must be genuinely living there ), you could add your husband as an owner and he will also benefit from Letting Relief. If you add him as an owner after you move out then the extra LR door is closed. Have you obtained permission from your mortgage provided to rent the property out. They may/insist you change the mortgage type so that would be an opportunity to add your husband as an owner. Regards Peter

[shoemake21]

This is the most sound advice ive been given guys, i really appreciate it too.

With regards to your question peter, i asked the mortgage lender and they said i would incur a small fee, but other than that i would be fine to do as I please as long as the house stays in good order (which if it is let to his brother is a def as he loves to keep his house clean!! proper house proud). At the moment we are geniunly both living at the old address, but were hoping to move to the new address in a few months.

Thanks Gemma x