Letting my property - tax implications

[Pud2]

I am moving to a new property which I’ve bought and will be letting my current flat as I haven’t been able to sell it. How do I work out how much I will be taxed under capital gains tax? Also, will there be further capital gains tax when I do eventually sell it?
Thank you!

There is no capital gains tax until you sell it. When you do it will most likely qualify for some principal private residence relief and letting relief. Whether there is any capital gains tax to pay at the end depends on the total gain and the amount of relief due.

You likely have income tax to pay if you make a profit from renting the property.

As the previous poster suggested you'll have to declare the rent as income and be taxed that way. I think you can let it for a while before capital gains tax will apply and its only on the amount the property gains in value whilst being let, could be wrong though. Also, not sure if you do, but if you have a mortgage on it you'll need permission to let it. Not exactly your question but it's also important to get special landlords insurance too as your previous insurance will become invalid.

You may be subject to second home stamp duty on your purchase. CGT only becomes liable on the flat after a period of it not being your primary residence, which used to be 3 years but you may need to check. Then it is payable on the difference between current value and the eventual selling price, less allowances.

You will need to complete an self assessment tax return and declare the rental income. You can offset certain expenses, though mortgage interest is restricted and will be phased out by 2020.

You will need to change your mortgage to a buy to let, you will need landlords insurance, you will need to get electrical / gas certificates and you will need to put your tenants deposit into a registered scheme.

When you sell you may be subject to capital gains tax on a % of the profit you make. This will depend on how long you rent it out for, how long you lived in it, etc.

Any yes you may have a higher stamp duty as your new property would be a 2nd property.

No, current value is irrelevant to capital gains tax. Gain is calculated as
Sales proceeds
LESS
purchase cost.
This gain is then apportioned between the time you are deemed to have had it as your main residence and the time it was let. Main residence period qualifies for PPR relief. Letting period may get some letting relief. If there is still part of the gain left over then annual exemption can be deducted from it and the rest is taxable.

Thanks everyone. I have lived here for 22 years and the value of the property has increased a lot, about x7. If I was just selling it, I would not be taxed on the profit I don’t think? . From what you’ve said, am I right in thinking that the rate differs between time in residence and the time it’s let?

I have had to pay the additional stamp duty but hope to resell within three years so I can get it back. Will certainly make sure I do a self assessment.

Presumably my tax code will change?

Unlikely to affect your tax code. A self assessment is done in arrears so you need to set aside an amount from the income to pay it.

You need an accountant.

Don't risk getting on the wrong side of HMRC. Ever.

The CGT exemption is now 18 months not 3 years

You will be possibly taxed on the amount it increases in value from 18 months after you moved out to the date of sale (the fact that you have tried to sell it quantifies that figure neatly)

You will get £11000 of tax free profit and pay your incremental rate on the rest.

Renting it out is taxable but the rules are now quite complex.

I would suggest getting an accountant to help you work it out (their fee can be offset against the letting income)

So when you sell, you take sales price, less purchase price and costs. You then split between time lived in it and time rented out, etc, etc

Get an accountant to help you

NO
You take change in price SINCE YOU MOVED OUT

I have an accountant fortunately. Just wanted some idea of what’s what so I don’t sound completely ignorant!

Ta1kinpeace - you are wrong

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

Ta1kinpeace Wrong! Value when moving out is completely irrelevant. Taxable gain is calculated as proceeds less cost less applicable reliefs.

sorry, brain not working, the last few I did were inheritance