UK landlord returns from abroad- tax on sale of BTL?

[willieD]

I bought a 1 bed flat in 1989 and lived in it for 8 years. In 1997 I found a job in Europe and moved overseas returning to a new job in the UK in 2001. This was in a different location to my flat so I rented then bought a house (now complete with wife & family) closer to my job.

During all this time since 1997 my flat has been let to the same tenent.
He is moving out in November and I am undecided to sell or continue to let it.

If I sell will: the years abroard not count for CGT purposes?
the time from when I returned to the UK count for CGT?

The flat was in negative equity until around 1999 will this have any effect on CGT?

[sretosf]

I bought a 1 bed flat in 1989 and lived in it for 8 years. In 1997 I found a job in Europe and moved overseas returning to a new job in the UK in 2001. This was in a different location to my flat so I rented then bought a house (now complete with wife & family) closer to my job.

During all this time since 1997 my flat has been let to the same tenent.
He is moving out in November and I am undecided to sell or continue to let it.

If I sell will: the years abroard not count for CGT purposes?
the time from when I returned to the UK count for CGT?

The flat was in negative equity until around 1999 will this have any effect on CGT?


I'm sure some of the forum experts will give chapter and verse on this / confirm if I am right, but as I understand it your gain for tax purposes will be:

(a) The price you sell it for less the price you bought it for. However you increase the price you bought it for using an indexation (inflation) allowance up to April 1998

from http://www.hmrc.gov.uk/rates/cgt.htm

you will see that this increases your purchase price by between a third to almost a half depending on when in '89 you bought it.

(b) Remember to include ALL the costs of acquisition including stamp duty, , solicitors fees, improvements (not maintenance etc). You can index these as well

(c) Remember to deduct disposal costs solicitors fees, EA's fees etc (you can't index these!)

(d) You can claim taper relief to reduce the gain by a further 60% as you've held the asset for more than 10 years

(e) As the flat was your primary residence for 8 years you don't have to pay tax on 8/17ths of the gain

(f) As you have rented it out you can claim a £40,000 letting allowance

(g) The first £8,800k of the remaining gain is tax free. As you are married you can transfer part of the asset to your wife so that the first £17,600 becomes tax free. Make sure you do the transfer to your wife BEFORE you sell!

The bottom line is unless the gain is massive, by the time you have claimed all your allowances / reliefs you shouldn't have much tax to pay at all. However I'm putting a massive caveat on what I'm saying - I'm no expert on this - so don't rely on what some stranger has told you in a web forum!!!!

[Tax Accountant]

I'm sure some of the forum experts will give chapter and verse on this / confirm if I am right, but as I understand it your gain for tax purposes will be:

(a) The price you sell it for less the price you bought it for. However you increase the price you bought it for using an indexation (inflation) allowance up to April 1998

from http://www.hmrc.gov.uk/rates/cgt.htm

you will see that this increases your purchase price by between a third to almost a half depending on when in '89 you bought it.

(b) Remember to include ALL the costs of acquisition including stamp duty, , solicitors fees, improvements (not maintenance etc). You can index these as well

(c) Remember to deduct disposal costs solicitors fees, EA's fees etc (you can't index these!)

(d) You can claim taper relief to reduce the gain by a further 60% as you've held the asset for more than 10 years

(e) As the flat was your primary residence for 8 years you don't have to pay tax on 8/17ths of the gain

(f) As you have rented it out you can claim a £40,000 letting allowance

(g) The first £8,800k of the remaining gain is tax free. As you are married you can transfer part of the asset to your wife so that the first £17,600 becomes tax free. Make sure you do the transfer to your wife BEFORE you sell!

The bottom line is unless the gain is massive, by the time you have claimed all your allowances / reliefs you shouldn't have much tax to pay at all. However I'm putting a massive caveat on what I'm saying - I'm no expert on this - so don't rely on what some stranger has told you in a web forum!!!!

No disrespect to ''retosf'' who has posted the above reply but it contains many incorrect information. I suppose there is lot of truth in the saying ''half knowledge is dangerous''.

Ramnik

[Tax Accountant]

I bought a 1 bed flat in 1989 and lived in it for 8 years. In 1997 I found a job in Europe and moved overseas returning to a new job in the UK in 2001. This was in a different location to my flat so I rented then bought a house (now complete with wife & family) closer to my job.

During all this time since 1997 my flat has been let to the same tenent.
He is moving out in November and I am undecided to sell or continue to let it.

If I sell will: the years abroard not count for CGT purposes?
the time from when I returned to the UK count for CGT?

The flat was in negative equity until around 1999 will this have any effect on CGT?

It appears that your absence abroad and also your absence in the UK from your residence is a qualifying absence until you bought your 2nd home in the UK. This assumes that you did not own any other residence which also qualified for private residence relief at the same time.

Additionally you have final 3 years exemption, lettings relief, taper relief and annual exemption allowance.

I would say that you do not have any CGT liability to worry about if you sell the property. It may also be that you could continue letting it for some more years and still pay very little CGT, if any, depending on exact figures and personal circumstances.

Ramnik