Capital Gains Tax

[Namechangedforthis22]

Hi. I wanted some advice please. We bought a property 15 years ago which we lived in for a while and then had to rent out as we had to move in with an elderly relative. The house we bought is our only house. We now want to sell it. As it is our only house and we have lived in it previously will we need to pay capital gains tax if we now want to sell it as we can’t afford the mortgage any more.

You will have to pay CGT but less because you deduct the number of years you lived there. Go on to HMRC website for full details. They have a calculator you can put info into and it will tell you how much CGT you would have to pay. The allowance is lower this year since April.

Yes you will pay CGT but you'll get Private Residence Relief for the period you owned it and other possible scenarios (last 9 months of ownership for example). Google it.

Thank you 🙏 it’s just a minefield. Feel like all we do is pay tax on everything. Can’t catch a break. Wanted to use the money from this house to buy a new one.

You can have 3 years of PPR if you don’t live in it fro any reason (ie caring) as long as you lived in it before and after. Can you briefly move back before selling? There’s no actual time set in legislation so as long as you had a bill for a period just before selling you could argue you lived in it prior to selling. Plus you’ll get PPR for the last 9 months and the actual time you lived in it.

You’ll also get £6,000 tax free each (assuming you sell before 5 April 2024, after that will be £3,000 each) and you can deduct acquisition costs (legal and SDLT for example) plus selling costs (estate agent and legal) before coming to your taxable gain. You’ll pay CGT at 18% if you’re a basic rate taxpayer or 28% if higher.

Thank you so much

re this extra 9 months, does this mean you could be away for 3years nine months with no penalty, moving back in to then sell, only leaving on day of actual sale completion? (ie you would have no need of the separate nine months allowance pre selling.

the extra last 9 months is given to everybody as long as at some point you lived in it. So the 3 years for any reason you have to live in it before and after a period of non occupancy, the 9 months you don’t have to have lived in it after the period non occupancy.

But yes, you could live in it, move out for 3 years and 9 months, move back in briefly (get some bills in your name for that property for that period as proof) and that 3 years 9 months will qualify for PPR and no CGT will be due for that period.

It might be worth working out whether it would cost you less to move back in for 9 months and pay no CGT.

They take into account the years you lived there compared to the years you rented it out and they deduct the difference.

thanks @buckingmad

Be careful about "artificially" moving back in for a short time. Recent tax cases have determined that it's "quality" rather than "quantity" that matters. You need to prove that you genuinely moved back in and made it your home (base) again.

I'd say you need a lot more than a couple of bills in your name at the address and if you move back in after putting it up for sale, that suggests you're not living there as your home, even more so if you move back in once contracts have been exchanged.

HMRC aren't daft!

You'd also need to change address on lots of "official" things, like your driving licence, car registration, obviously HMRC and any benefits (child benefit, state pension etc), all your banks, building society, pensions, and share/investment accounts, local council voter registration, etc.

Furthermore, you absolutely CAN'T move back to the same address (elderly relative) after your short period of claiming to have moved back to the house you own - that screams it's just an artificial sham!

Surely the first stage is to work out what, if any, CGT there'd be as it stands. It may not be that much if you genuinely lived there for many years, and certainly may be cheaper than paying for removals vans to move your furniture and belongings back to it, just temporarily, and then to move it all back again once it's sold, plus the time/hassle of changing all the official addresses (twice). Only when you know how much CGT is at stake, and compare it to how much less it would be if you genuinely moved back temporarily, can you decide if it's worth going through the sham of moving back in (and taking the risk it may not work anyway!).