If I move into my rental property will I pay future CGT?

by Readers Question

11:25 AM, 24th June 2019
About 3 months ago

If I move into my rental property will I pay future CGT?

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If I move into my rental property will I pay future CGT?

I have now sold my main residence home and have given my son the cash from the sale.

I will now be moving into one of my rental properties which I have never lived in previously.

Once I have lived there it then becomes my main residence and as my principal residence for 12 months or more will I have to pay Capital Gains Tax (CGT) on any future sale?

Many thanks

Jackie

Editors Note:

Click Here to work out tax relief when you sell your home

Period of ownership >> Click here for HMRC guidance

“Your period of ownership begins on the date you first acquired the dwelling house, or on 31 March 1982 if that is later. It ends when you dispose of it. The final 18 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.

If you’re a disabled person or a resident in a care home the final 36 months of ownership may qualify for relief if you don’t have any other relevant right in relation to a private residence.

If the dwelling house has not always been your only or main residence, you’ll need to split the gain. When calculating the proportion of the gain eligible for relief, you multiply the gain by a fraction equal to the periods of occupation (including the final 18 or 36 months where appropriate) divided by the period of ownership (both periods starting at 31 March 1982 if the house was owned before that date). You don’t introduce valuations of the property at the dates of changes of use.

4.4 Example 4

You bought your house in January 2005 and sold it in January 2017. You lived in the property as your only or main residence apart from 18 months in 2006 and 2007 when you lived in a different house. So the house qualifies for relief for 126 out of the 144 months you owned it. A proportion of any gain you make from the disposal amounting to 126/144 will qualify for relief. If you had moved out of the house at some time after July 2015 instead of in 2006 and 2007, your relief would not be restricted. If you had bought the house before 31 March 1982, the calculation above would begin from 31 March 1982 and not from when you bought the house.”

 



Comments

Neil Patterson

11:28 AM, 24th June 2019
About 3 months ago

Dear Jackie,

I have included HMRC references above concerning PPR relief.

However, you need to also consider the sale proceed gift to your son as a Potentially Exempt Transfer for IHT.

craig rennolds

12:07 PM, 25th June 2019
About 3 months ago

Reply to the comment left by Neil Patterson at 24/06/2019 - 11:28
Hi Neil,

Can you expand on proceed gifting as I am considering selling a property soon.

Frederick Morrow-Ahmed

13:22 PM, 25th June 2019
About 3 months ago

Hi Neil, are you and accountant?

Neil Patterson

13:31 PM, 25th June 2019
About 3 months ago

Reply to the comment left by Frederick Morrow-Ahmed at 25/06/2019 - 13:22
Hi Frederick,

No I am not that is Neil Barlow at Pacific Ltd. Please see >> https://www.property118.com/member/?id=452

We often get confused, but my advice to everyone is always seek the expert opinion of a fully qualified and importantly insured accountant.

colette

17:43 PM, 25th June 2019
About 3 months ago

Thanks and I am aware of IHT regarding gift of cash. It is cgt I struggle with. When the sale of my own residence completes I have no home so I had assumed that I could move into the empty rental property (I have never lived in it and bought it in 2012) and it would then become my main residence. I had also assumed that as it then became my main residence that at some point in the future when I decided to sell then it would not attract cgt as it would be my main residence. ?

Neil Patterson

19:12 PM, 25th June 2019
About 3 months ago

There would still be a portion of CGT to pay dependent of the ratio of PPR relief, but you can check that from the HMRC calculator in the link.

Simon Lever

10:38 AM, 30th June 2019
About 3 months ago

Please take detailed advice from a qualified accountant. Believe it or not anyone can call themselves an accountant with no professional qualifications or insurance at all.

The period of time that the property is occupied as a principal private residence (PPR) compared to the total period of ownership is exempt from capital gains tax (CGT). The final period of ownership, currently 18 months, is also exempt. From April 2020 this period reduces to 9 months.

Also you MAY be able to claim lettings relief of potentially up to £40,000 as well.

Whilst this forum can give general advice it is no substitute for taking professional advice. The cost is worth it in the long run.


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