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.

Speak to an accountant and get a quote. Before I retired I would have charged £250 plus VAT for the calculation and filing if required. Do ask for a quote but even double is worth it for peace of mind.

You've got a lot of reliefs going on to help minimise any tax and, remember, you probably made a lot of the gain from choosing to hold on to the house, so that appears to be a good decision.

Sum is pretty simple equity gained minus applicable costs so you could take off the extension costs but not money that was spent on the existing house, decorating / replacing bathrooms type stuff. Divide that by 56 * 17 minus £12k ( two lots cgt allowance assuming joint ownership) and that will give you a decent idea.

Actually I think they disregard nine months of letting so I’m pretty sure you’d be under the cgt allowance threshold . Remember you can knock off solicitors fees etc.

The whole £80k may not be claimable for the extension
If you had a kitchen but put a new one in the extension then that is betterment and not allowable (the kitchen units etc not the building shell) . If it was a second kitchen and you retained the old one then that is an improvement and not a replacement

Better to confirm it before next year because while from the information we have it doesn't look like there's a taxable gain, if there is you're already late so you want it to be as early as possible. You could probably wait til 1st Feb but don't leave it til next tax season.

E.g. you said you had the house for 56 months, but it looks like it should be 75 months? So you need to get all your facts straight.

I think I agree there's unlikely to be a chargeable gain here.

Conceptually I would calculate the tax like this:

Sales price (417k)
Less costs to sell (unknown)
Less upgrade costs (80k) *
Less purchase price (255k)
Less costs to purchase (I think including stamp duty) (unknown)

Gives gain (Max 82k between the two of you)

In reality with will be less than that by a few thousand.

Then deal with the proportion of the time it was your private residence just ordinarily so in this instance that would be 75 - 17 I think but you'd need to correct that for actuals. So 58? Or 56 months depending when in the various months you moved (assume this might be the 56 months you ref in the opening post).

So that portion is definitely eligible for relief :

56/75 x82 = 61k ish eligible for relief. In reality it might be a couple of months higher and the 82k will be a few thousand lower.

So then there 22k that you're not sure if you can get relief on.

There is then more you can do, but this is the point at which my confidence in the calculations runs out. Even at this point that's only £11k chargeable gain each, on which you each get a cgt allowance of 6k so only 5k each taxable, (I think) at either 18% or 28% depending on your tax band, so £3k total.

Obviously you'd have the issues arising from late payment if you determined you did have to pay.

BUT it's then actually still probably okay because then you start applying the various rules being referenced up thread - topping the final live there up to 9 months, disapplying gaps under 3 years total etc etc. (I get very hazy on those bits @Taxdoesnthavetobetaxing has been much more helpful.)

In all likelihood you get the chargeable gain down to nil or at the very least to below your collective allowances for CGT.

• Editing to note you need to check what's an allowable upgrade cost as well, I've assumed this all is

I think this website is really helpful. As I said they disregard 9 months of you letting it out, so it's only profit after expenses so using Papillions 82K as an example 8/56 is £11.7k which is neatly under the cgt allowance https://www.which.co.uk/money/tax/capital-gains-tax/capital-gains-tax-on-property-aUvSS1P7cdEV

@Blueberrymuffin8 the reason why a CGT declaration is triggered when you say yes to rental income ceasing is because in most cases the rental income will have been coming from a buy to let, upon the sale of which, CGT is payable.

However in your case the rental income was from your own and only property and as has been clarified upthread you then moved back into the property meaning no CGT payable.

For everyone saying it's for next year's tax return, CGT is now dealt separately to your self assessment and has a filing deadline of 60 days post sale. But as already stated that is not applicable in this case.

I think there is confusion about ‘only’ property. It doesn’t matter if it’s your only property, mine was. It matters where you can be considered to have your ‘main residence’.

I had stayed in my partners house for some years. All bank and admin for me was from my partners house. I rented out ‘my only’ property, my house. My partners house had nothing to do with me, I was not renting or on the mortgage.

So because my partners house was my main residence, (not owned), then I could not claim that my mortgaged house was my main residence. Even though I once lived in it.

But the OP, according to the rules, can for a large part because of the 3 year rules (a bit complex, but you can claim up to a certain amount).

Accountant here - OP please ignore the majority of comments in this thread, they are totally wrong. I know folk are trying to be helpful but tax can be very complicated and most of you are not correct in what you are saying.
OP - any local accountant should be able to do the calculation quickly and advise you. It’s bread n butter to most of us.

@Blueberrymuffin8 there has been lots of great information provided, I hope you manage to get everything sorted. I posted about a recent sale of my property and I hadn't even realised that I may need to pay CGT. So I am so thankful to the mumsnetters who responded. Ultimately I i have decided to get an account as I am out of my depth and don't want to make any costly mistakes.

The accountant called me back to say that because we had rented out for less than 3 years and came back to the property, we don't have to pay!! The relief is immense.

Thank you to everyone who responded to my thread!

Glad it's resolved @Blueberrymuffin8 ! :)

Presumably then you didn’t file a CGT60 day for
when you sold ?

You have 60 days from sale to file the form and pay the tax owed so you need to do this urgently to mitigate penalties

You need another accountant it’s not 3 years anymore

For your property situation, it sounds like you may be eligible for Private Residence Relief, given that the property was your main residence at some point. However, the partial rental might complicate things a bit.
I'd strongly recommend getting in touch with a tax professional or accountant. They can navigate the complexities, help you maximize any relief you're entitled to, and guide you on the capital gain tax implications of the sale.
In the meantime, gather all the relevant documents – purchase and sale agreements, records of the work done on the property, and any rental income details. It's a good start for the accountant to assess your situation.
Remember, seeking professional advice is an investment in peace of mind, especially when dealing with significant financial matters. Hang in there, and I hope things get sorted out smoothly for you!"

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

Yes it is!!

https://www.gov.uk/tax-sell-home/absence-from-home

You get relief if you were away from it for:

• any reason for periods adding up to 3 years