Capital Gains on my only (rented) house

[tizza]

I bought a house in Leeds just over 3 years ago whilst I was living in rented accommodation down here in London. Up until November 2005 it was the only property I owned. Howvere in November 2005 I managed to buy a property down here in London which I am now living in.

I am now looking to sell the house in Leeds and am not sure what is going to happen about Capital Gains. I haven't actually lived in the house since I owned it. However I did live in the property for 2 years before I owned it - I bought it off my ex-partner when we split and I moved down to London. Up to then it had been completely owned by him.

Am I likely to have to pay Capital Gains on the full difference between the purchase price and the sale price even though for the majority of time I owned it it was my only property and I was living in rented accomodation in London myself.

Any good advice gratefully received.

Thanks

[Tax Accountant]

I bought a house in Leeds just over 3 years ago whilst I was living in rented accommodation down here in London. Up until November 2005 it was the only property I owned. Howvere in November 2005 I managed to buy a property down here in London which I am now living in.

I am now looking to sell the house in Leeds and am not sure what is going to happen about Capital Gains. I haven't actually lived in the house since I owned it. However I did live in the property for 2 years before I owned it - I bought it off my ex-partner when we split and I moved down to London. Up to then it had been completely owned by him.

Residence period before owning it doesn't count.

Certain periods of absences from the property may be treated as periods of residence provided both before and after the period there is a time when the house is your only or main residence, unless you were living in London in licenced accommodation provided by your employer (eg Armed forces).

Unfortunately, the house was not your residence, whilst in your ownership, before the period of absence and therefore you cannot avail yourself to this relief.

Am I likely to have to pay Capital Gains on the full difference between the purchase price and the sale price even though for the majority of time I owned it it was my only property and I was living in rented accomodation in London myself.

I am afraid so. You will of course receive some taper relief (at 3 years, this is 5% of the gain) and CGT annual allowance.

Any good advice gratefully received.


Recheck to see if the property was in your ownership and used as your residence, even for a short period, prior to commencement of letting or even in-between lettings before you bought the London property. It wasn't necessary for you to have lived in it fulltime; occasional use may prove sufficient in your case..

Even now, if you were to use the Leeds property as your residence, you may be able to nominate it as your main residence for CGT PPR relief purposes.

If the rental income makes sense, and it is in a good location for the long term, consider keeping it rather than selling it.

You could presumably be able to remortgage it to extract some of the equity in the property and at the same time hopefully benefit from future growth in value.

Thanks

See comments above in red.

Ramnik