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If I lived in my own flat, and then moved into someone else's home, do I pay CGT when I sell?

7 replies

EveryoneAnon · 16/02/2015 21:04

The flat is in my sole name and I informed the mortgage lender that I intended to move in with my boyfriend and rent it out.

My boyfriend lives in a flat that is owned by himself and his parents (50/50) and which is mortgage free. My name is on no paperwork.

We married last year and so now share the same name, as well as address.

I don't intend to sell my flat for a few years, but when I do, will I have to pay Capital Gains Tax? As I said, the mortgage for it is solely in my name.

OP posts:
NerdyBird · 16/02/2015 21:12

Yes, you will have to pay capital gains tax. I believe you don't have to if you sell within 18 months of moving out (used to be longer but they changed it). And you only pay tax on the gain, not the whole amount if I'm understanding it correctly.

If you moved back in and lived there as your primary residence you may not have to pay it but I don't know how long you'd have to live there for for it to count.

LIZS · 16/02/2015 21:16

Yes but there are substantial annual allowances and it would only be due on the gain from the time you moved in with him.

TalkinPeace · 16/02/2015 23:13

You will be liable for CGT.
Whether you have any to pay is another matter altogether.

From the date you move out there are 18 months where you can sell it tax free.
after that it comes under the CGT umbrella
BUT
the tax is on the gain in value from the day it becomes liable (not from when you bought it)
AND
there is a £10,000 and rising tax free allowance
AND
costs of sale and indexation are allowed

so if you sell it any time in the next five years, chances are you'll have very little to pay
unless its in central London!

Chasingsquirrels · 18/02/2015 17:53

As per Talkinpeace, and in addition you would be eligible for lettings relief. You need to understand the calculations and work the figures - or get someone who understands it to do it for you.

ARoomWithoutAView · 18/02/2015 22:01

This looks long, but you can relax. And her is why.

The CGT is calculated on a linear basis - you don't revalue it each time you occupy or let. And there is no indexation. Indexation was abolished in 2008, and only companies can now claim it. You take the difference between the net sale proceeds (net of selling costs) and the original cost inclusive of SDLT. You then time apportion the overall gain. The exempt period is (generally) the whole of the period of your occupation plus the last 18 months divided by the whole of the period of ownership.

For example (ignoring transaction costs) - Bought £100,000, sold for £200,000 = £100,000 gain
You moved out after 6 years and then let for 1 year then sold after 10 years of ownership, then the exempt period is 6 plus 18 months - in other words 7.5 divided by 10 = £75,000 exemption.

The chargeable period is then reduced by Lettings Relief which is subject to a cap of the lower of;

a) £40,000
b) the period the property was actually let (1 year out of 10, or 10%)
c) the period the property was actually occupied by you (7.5 years out of 10, or 75% again)

In other words, the Letting Relief cannot be worth anymore than the gain attributable to letting, nor exceed the gain attributable to occupying, nor in any case £40,000. Then there is the annual exemption which is c.£11,000 which may cover whatever is chargeable. You can also get relief for periods where your employer requires you to work in another part of the country or overseas, providing (generally) you re-occupy afterwards.

Sound confusing?....well that is the UK tax code! But in many cases of occupation, moving out, followed by letting and then a sale within 18 months of the final tenant leaving there should be no tax. Bear in mind that all these reliefs have to be claimed - so you still have to notify HMRC when you sell and ask them to issue a tax return for the following April.

EveryoneAnon · 18/02/2015 23:42

Great information, thank you Smile

OP posts:
Goodpresentideaplease · 18/02/2015 23:56

aroomwithoutaview is correct. There is no longer indexation but as long as you rent it out, you should not have much if any to pay.

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