Honestly was not aware of Capital Gains Tax!

[Blueberrymuffin8]

Hello everyone, hope everyone is doing well.

I havent felt so good since last night when I did my self assessment form. I know a lot of people say this but I genuinely thought I would only have to pay tax on any rental income I received.

Long story short, I rented my house out to a friend (for just over half the going monthly rate) for 17 months of the 56 months we lived there. Reason being we had to live closer to my husband's new job. We came back 7 months before we actually sold in June 2023 (I know, I've missed the deadline!) Renting it out was not to make a profit, we just genuinely didnt have the time to put it on the market. We did end up having to sell because we couldnt keep renting where we moved to.

Over the 6 years we owed the house we prob spent 80k on work, including large extension at the back. Bought for 255k in Mar 2017 and sold for 417k in June 2023.

Does anyone know how much tax I need to pay? I have no idea how to calculate the private residence relief for this either. I'm scared because we do not have savings to fork out for this 'gain'.

Do I need an accountant?

Any help would be so welcome right now. I didnt sleep at all last night.

You could also ring up HMRC they are usually very helpful. Also found this recently:
https://community.hmrc.gov.uk/customerforums/pt/097f17c5-77af-ed11-9ac4-00155d975688

HMRC answer questions. Not the best time of year to get help, but you can try.

Better link to CGT tax part directly.

https://community.hmrc.gov.uk/customerforums/cgt

If you sold in June 23, won't the CGT be on next year's self assessment? I haven't claimed for a property, but gains on other things I've only put in up to end of tax year in April 2023. That would give you a year to figure it out.

If you were renting a property and living in it whilst renting your own property out your CGT liability is £0 when you sell the house you own.
You would only have a CGT liability on the sale of a second, third etc property. You are allowed to own a house and not live in it and then sell it provided you hadnt bought and therefore owned more than one property at the same time.

Thanks so much for your positivity. This type of kindness makes me feel better x

Deep breath, OP, money stuff can be really worrying. An accountant will sort it all out and you'll be safe in the knowledge that you've got everything right and above board.

This isnt the case when selling a property when CGT is due. The CGT has to be paid to HMRC within 60 days of completion. You would then include it on the tax return for the relevant tax year which may be the following year. We sold a second property in August 2022, paid the CGT due within 60 days. It is now included on the tax return I am due to submit before Jan 31st 2024

We bought a house and rented it out to my (very troubled) sister - when she took her own life we were obviously very distressed and in all the stress of selling the property the CG tax was forgotten. When I eventually remembered, I explained the situation to an accountant and he just told me exactly what I needed to do. It was all fine in my case, partly because we'd spent a lot on it and not made much.

I would get an accountant and take it from there.

If you were renting you should be fine.

https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/capital-gains-tax/selling-your-home

I don’t think there should be any issues if you have declared rental income from your property which would count as your personal tax. In my understanding capital gains is only paid on 2nd homes which you don’T have

I don’t think there’s any tax to pay, and therefore no requirement for 60 day reporting either.

You owned the flat for 75 months (Mar 17 to Jun 23).

You moved out for 56 months and returned to live in for 7 months before selling.

The last 9 months of ownership are deemed to be occupied as main residence. Therefore 2 months of the 56 are deemed as occupied, leaving 54 months.

As you were required to move for work in the UK, you are deemed to have occupied it for 48 of those 54 months. This leaves only 6 months where it is not your residence.

Your gain is £82k (but you can also deduct solicitors costs on buying and selling, estate agents fees and stamp duty on the purchase from this). But working with £82k for now, you pay tax on 6/75ths of this - so £6,560.

As you own jointly you each have a £6k tax free allowance which covers the taxable gain.

Probably get a high street accountant to check but I think you’re fine.

Not true, renting (either letting or renting another property to live in) does not create a CGT exemption.

Not true, CGT is payable on the sale of rental properties.

Not true. A rented property can be your principal residence. You can’t even elect for a property you let to be your principal private residence as it is not your residence and so falls at that hurdle. A link earlier up the chain (linked to prove jt was fine, despite saying the opposite) clearly states this.

There is an online calculator but an account is a good idea. You haven’t let it out for that long to be honest and if you can show the renovations were for improvements, not repairs, that makes a huge difference.

I had to pay a lot of money for Capital Gains, wish I’d been a bit more financially savvy beforehand and I wasn’t sure about some of the things I put in for improvements etc - but you can send a list of what you think should be taken off in a file - I did this upfront so that if they think I’ve say put in something for improvement and it should be repairs - then they can let me know.

Just put everything in upfront to the tax office and you should be ok.

This is true, as unfair as it is, my house was also my own home. I rented it out whilst living with my partner in his house. It wasn’t second home, or a third home. It does feel a bit tough as my partner obviously never had to pay capital gains on his house, and I moved into his house not really realising the implication.

Use this link to check - HMRC - big green button half way down the page.

Some points to note:

• costs associated with selling the property can be included - solicitor's fees, estate agents fees
• costs associated with buying the property can be included - solicitor's fees, stamp duty
• costs of actual improvements (extensions, for example) can be included. The details on the webpage says "replacing a basic kitchen or bathroom with a luxury version is normally considered an improvement. Replacing them with something of a similar standard is not normally an improvement (it's considered a repair cost, which, if incurred when you were renting it out, can be accounted for as a deduction against your rental income instead)

This page - PRR talks about how much Private Residence Relief you're entitled to for having lived in the property for at least part of your ownership.

This website gives you a calculator to use to determine the amount you'd be entitled to (using "additional details"). You can put the whole calculator on there.

If the property is owned jointly, it should be on both your personal tax returns and you'll both get the first £12,300 of a gain tax free.

Gather all your information together, put together a timeline of when you bought it, when you lived in it, when you rented it out and when you returned and sold it, then speak to an accountant.

Unfortunately, January is a horribly busy month for tax accountants, but as a PP has said, you're already late for the 60 day submission and it actually falls in to the 23/24 tax return (unless you exchanged contracts before 5th April). You might want to park it for a couple of weeks and speak to someone in early February.

Did your conveyancing solicitor mention CGT when you sold the property? I do think the 60 day rule is silly for people like you that have found themselves as accidental landlords. Circumstances created the situation and I can understand how you might not have been aware of CGT.

It's probably not as bad as you think. You've lived there and can also show improvement work.

Paying for proper advice will definitely be worth it.

I’m a tax advisor and you’ve been given some really terrible advice on this thread. This is why you should never take advice from strangers on the internet (me included).

Your property appears to have been your PPR (TCGA1992 s222) and even though you lived away for 17 months, as you re-occupied the property you are eligible to claim deemed absence for any reason for up to three years (TCGA1992 s222(3)(a)).

Therefore the gain is fully covered by PPR meaning you don’t have to file within 60 days (unless you’re not U.K tax resident).

This claim would just be reported on your tax return next year assuming you file for the rental income, or not at all if you are not in self assessment because the rental income was under the property allowance.

No accountant is going to thank you for getting in touch in January, but this could be confirmed in a half an hour introductory call. Please don’t stress and try ringing round some reputable local places in the morning. Best of luck.

www.gov.uk/tax-sell-property/work-out-your-gain

Calculate your gain using the HMRC link.

Report your gain and pay any tax due within 60 days

This is not true
Capital gains have to reported and paid within 60 days. ( it used to be 30 days)
Probably not applicable in this case but capital gains have to be reported separately although later reported under self assessment too.

Thank you so much for taking the time to write this (I'm also grateful to others who have done the same!) I feel like a huge weight is slowly being lifted. I was so stressed out.

As the claim doesnt have to be filed until next year, should I just file my self -assessment myself now and get the accountant to do the next one for me (too complicated for me!) Any advice is greatly appreciated. What I dont understand is when I did try to do my own self assessment, there was a part that asked if rental income had ceased between 2022 - 2023 which it had, and because I ticked the 'yes' box, I had to fill in a capital gains form. That's how I found out about it. Maybe I should just pass this all to the accountant!

Again, thank you so much. I will definitely be able to sleep better tonight x

OP I sold a btl property in July 2023 and I'm sure we had to pay CGT within 60 days of the sale.

But self assessment for btl rental income to be submitted by the end of January will be April 6th 2022-April 5th 2023.

Yeah sorry- that was me- I’ll get my coat [sheepish shrug]