Renting your main residence and CGT

Renting your main residence and CGT

21:31 PM, 14th September 2022, About 2 weeks ago 4

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I am contemplating renting a family home which we have lived in for 25 years. Given the length of time we have owned our house there is a lot of financial gain in value. I have now learnt that if we rent our house we will have to pay capital gains on the portion of time our house is rented out.

I wondered whether anybody knew if we got a proper survey value of our house now could we cap our capital gains at that date as obviously values are high at the moment and as interest rates are rising the property values may well fall And there will be no capital gain for a period of time. Or is it a given that the capital gains is only worked out at the point of sale and has to go from the purchase price?
We are trying to look at all options before making any decision but as we roughly have a £32,000 per annum gain in our property capital gains can soon add up and dent into our rental income.

Any help or advice would be greatly received.

Thanks

Louise



Comments

David Smith

10:22 AM, 15th September 2022, About 2 weeks ago

My understanding is that the only valuation that will be taken into account is when you come to sell the property.

The CGT will be calculated by the number of years you rented in it minus the years you lived in it. So if house prices went up significantly whilst you rent the property out you could pay a disproportionate higher amount but the reverse if prices fell.

Laura Delow

11:29 AM, 15th September 2022, About 2 weeks ago

Beaver

12:29 PM, 15th September 2022, About 2 weeks ago

Reply to the comment left by Laura Delow at 15/09/2022 - 11:29
So lets say your potential CGT liability was at 40%. Suppose you rented the house out for 25 years so you'd lived in it for 25 and rented it for 25 and your capital gains liability might be 20% (you might of course be able to offset some expenses).

Corporation tax is always around 20%. House prices normally double in a 20 year period. Where else are you going to get an investment that secure that is likely to pay a return less 20% tax?

There is also the option of renting it out as your Principle Private Residence under the rent a room scheme and living somewhere else.

NewYorkie View Profile

12:48 PM, 15th September 2022, About 2 weeks ago

When I sold a flat I had lived in for 3 years and let out for 7, I deducted all my buying and selling costs, plus the cost of any alterations, improvements, etc... before calculating the CGT liability. It was still a hefty charge because prices in London had increased a lot!

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