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  • Tax

    Capital gains tax - is my wife liable?

    Hi, my wife has her property rented out August 2016, she has living with me since. Question is does she have to pay CGT when she wants to sell, she own the property since 1996, live there until then. Have look through HMRC, not much help there, not to mention nightmare to get through. 

    the property is now mortgage free. Is her property considered as second home? how do I work out the CGT?

    appreciate as much info given as anyone can. Thank you

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    I would say that only renting the property out for the last couple years

    and having owned and lived in the property for the number of years stated that capital gains will not be payable .

    If the property continued to be rented out depending on how many years then the situation could change .

    Regards

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    if you lived somewhere and then rent it out, the first 18 months (I think) of renting it out is free of CGT.  It is unlikely that she would have made significant capital gain since Aug 2016, so she may well be OK if she sells now.

    Please get professional advice - you will probably spend a few hundred £ but could save £ thousands.

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    Is it just the 'capital gain' from the date of the beginning of the rental to the sale of the property or the original purchase price?


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    It is from purchase date and cost for working out the gain but she will have a high % exempt as her PPR, then letting exemption, then annual exemption so as spiritual says very unlikely to have any cgt

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    hope this makes it clearer. The purchase of the property was in Nov 1996, obviously now value has increased sinificantly.(profit might be over £200,000) Rent out Aug 2016 ,we are thinking of selling in 2019. we tried using 'Which' website to work it out, after the PRR/letting relief, it comes up about over £18000 to be tax.

    My point is whether to sell it soonner than later, if the rental is not going to be long term, to avoid more tax.

    my letting agent told me if I move back in for 6 months after tenants left and sell it, than it won't occur CGT. Is that correct? he did say this is current situation, and might change.

    This was my home for 20 years, to think after paying the mortgage for 25 years, tax on rental income, and again tax on selling, is it worth it.

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    Your agent is incorrect but it doesn't matter. Have done a rough calculation and no tax.

    Deb

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA


    Hi Debbie, Thanks for the info, is there a calculation I can refer to for future use , should I decide to rent out a longer period.

    Thank you

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    if you e mail me debbief@peplows.co.uk I will send.



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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    I too bought a property I bought in 1996 which I am planning to sell in 2019 Smile

    I paid £80k and lets say it sells for £280k - a £200k capital gain.

    I live in it until 2014 and if I remember correctly the last 18 months of ownership count as if I was living there, so PPR means only (23-19.5)/23 of the capital gains counts for tax - 30.4k. At 28% that is a tax liability of 8.5k  which is less than the annual allowance.

    28% of your 18k would also be below the allowance so you seem not to have a problem.

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