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  • Tax

    Capital gains tax

    What is required when selling a house that you have previously lived in as your main residence as proof for CGT purposes?

    For example i am selling a house which i have owned for nearly 18 years but has been let for the last 7 years. I would expect it to be sold by the end of this year.

    When calculating your CGT minus allowable expenses what proof is actually required of your residence, purchase costs, improvement costs etc ?

    Also does anyone have a link to a good calculator to work out exactly what needs to be paid?

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    Hi PB,

    No proof is required unless you are challenged by HMRC.

    If you were, then you would be able to show council tax bills, that you were on the electoral role, and the Land Registry would show the price you paid, which would then prove how much stamp duty you paid.  The rest would be estimates.

    Your solicitor will be able to give you a rough indication of the liability.

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    Following on from what Vanessa says, you would report the property sale on your self assessment tax return.  HMRC may then in the future request further details of the transactions in question, and so the more documents you have, the better.

    As far as proving your residence, this is often a question that comes up, as to what is the minimum time is you have to live in a property for it to be classed as your main residence for tax purposes? You will hear varying answers from lots of tax advisors and accountants, but the truth of the matter is that there is no actual minimum period.  It is really a case of quality, and not so much a case of quantity.  By quality we mean that HMRC would expect that you genuinely intended on making the property your main residence.  If you moved house, you would change all manner of things, such as the electoral roll, registering the TV licence and council tax to your name and new address, changing doctors etc.  For some landlords, you may have genuinely intended to live somewhere, but perhaps a month later something completely unexpected may happen, such as a family death, which may change all your plans.

    You would essentially pay tax on the gain arising on sale, which is your sales price, less any purchase and sales costs, less any capital improvements.

    From what you have said, it would appear you may have 11 exempt years for PPR when you lived there, along with the last 18 months.  You may also be entitled to lettings relief given the property has been rented to tenants, which is worth up to £40,000, plus you would have your annual exemption.

    Therefore, there is quite a fair amount of scope to look at reducing your capital gains tax bill.

    Hope that helps and for any of your property tax needs, please do not hesitate to contact RITA4Rent on Freephone 0800 1 22 33 57 or via email using the contact details below.

    Best wishes,

    RITA4Rent

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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk