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Original poster

Private residency tax

10 replies

Chopsticks2829 · 21/02/2023 21:38

Hello, please bare with me while I try and explain my questions.
I own 3 houses. One is my main residence (mortgage under £100k), one is rented (mortgage free) and the other is rented to my father (also mortgage free). He is an alcoholic who has a part time job and receives a small amount of UC but has never paid me rent even though technically he is my tenant.
I purchased my main home which I live in with a small mortgage in 2018. I got the chance to
buy a property relatively cheaply the following year so I remortgaged my house and used my savings to buy (this purchase was therefore a cash purchase).
My father was then evicted from his council property and to save him being on the streets, I purchased a small bedsit to try and help him. This was under the threshold of stamp duty as I only paid £30k for it (it’s no palace but it’s a roof over his head which no one can evict him from).
Anyways, to cut a long story short, I am struggling with the cost of living so have decided to sell my main home. I’ve lived here for 5 years continually.
I have given my tenant his notice to quit and he is due to leave in April.
My plan is to simplify my life and live mortgage free, so I intend to move into the property which is currently rented.
I plan to live there for a year or so, but it has a very steep staircase so it’s not suitable for my needs long term.
My plan is to sell this property too and buy my forever small bungalow.
How will HMRC view this? Will I need to pay private residency tax on any of these properties? I’m planning on selling 2 properties in the next 18 months or so… one is my current home which I’ve lived in permanently for 5 years… the other has been rented out for a couple of years and I intend to make it my permanent home until I find my a suitable property down the line.
I intend to do nothing with the property my father lives in. I accept it I’ll never get any rent but my mind is at peace knowing his is safe.
Will HMRC question his claim for tax credits yet I, the landlady, receive nothing?
Confusing I know. Thanks for reading.

OP posts:
LIZS · 21/02/2023 21:41

Do you mean cgt? The one you rent out and the one your df occupies are both currently liable. If you moved back into the other there is a minimum period before exemption applies, with cgt based on a sliding scale.

MotherOfPuffling · 21/02/2023 21:44

I don’t know all of the rules, but my understanding is that capital gains tax isn’t paid (I’ve never heard of ‘private residence tax’, sorry) if (a) you lived in the property as your main home for at least 6 months in the last 3 years; and (b) the money from the sale is used to fund a purchase of a house you live in as your main home. That purchase must be made within a given period too, something like 2-3 years. It’s probably worth looking up the rules on capital gains tax.
You’ve said your father is getting both UC and tax credits. If he is claiming a rent element of UC when not paying rent then he is committing fraud. I didn’t know claimants can get both UC and tax credits, but presumably if he’s getting both then it’s legit.

LIZS · 21/02/2023 21:47

Surely if he is not working he would not get tax credits, or once moved onto uc. Nor should he get any housing element since he does not pay for it. Some councils do not accept kinship ll anyway, or only if there is a formal tenancy agreement,

Motherzly · 21/02/2023 22:02

Do you mean principal private residence relief (PPR)?

www.gov.uk/tax-sell-home

VeggieSalsa · 21/02/2023 22:07

MotherOfPuffling · 21/02/2023 21:44

I don’t know all of the rules, but my understanding is that capital gains tax isn’t paid (I’ve never heard of ‘private residence tax’, sorry) if (a) you lived in the property as your main home for at least 6 months in the last 3 years; and (b) the money from the sale is used to fund a purchase of a house you live in as your main home. That purchase must be made within a given period too, something like 2-3 years. It’s probably worth looking up the rules on capital gains tax.
You’ve said your father is getting both UC and tax credits. If he is claiming a rent element of UC when not paying rent then he is committing fraud. I didn’t know claimants can get both UC and tax credits, but presumably if he’s getting both then it’s legit.

None of this is correct.

When did you buy each of the properties and we can advise further?

But basically you won’t pay tax selling the property you live in now if you’ve lived in it the whole time you owned it.

The only you currently let will be exempt the period you live in it.

So for example if you make a gain of £100k when you sell it, have owned it for 10 years and lived in it yourself for 1 year then 10% of the gain would be exempt (for 1/10 years lived in) and you would pay tax at 18%/28% on the remaining £90k gain (ignoring your annual exemption etc etc)

Original poster
Chopsticks2829 · 21/02/2023 22:14

Apologies… he claims UC, not tax credits. I am not up to speed with benefits… nor CGT or anything… I’m so not up to speed with anything tbh

OP posts:
Original poster
Chopsticks2829 · 21/02/2023 22:25

VeggieSalsa · 21/02/2023 22:07

None of this is correct.

When did you buy each of the properties and we can advise further?

But basically you won’t pay tax selling the property you live in now if you’ve lived in it the whole time you owned it.

The only you currently let will be exempt the period you live in it.

So for example if you make a gain of £100k when you sell it, have owned it for 10 years and lived in it yourself for 1 year then 10% of the gain would be exempt (for 1/10 years lived in) and you would pay tax at 18%/28% on the remaining £90k gain (ignoring your annual exemption etc etc)

Show quote history

Thank you. I purchased my current home (A) in 2018. I purchased my rental (B) in 2019. I purchased my fathers bedsit (C) in 2022.
I intend to sell A this year, pay off my mortgage (£80k) and bank the rest (£120K).
I intend to move into B for a year or two. This will be my permanent and only residence (purchased for £90k, approx value today £110k)
I then intend to sell B (I paid 2nd home stamp duty on this property) and buy my forever bungalow.
With reference to my father, I have a proper formal tenancy agreement but his life is so chaotic I receive nothing. I don’t push for it. I just accept he is who he is and I’m grateful for small mercies that he is safe. I often wonder am I getting myself into a wrangled mess by helping him… 🤷‍♀️ My intensions are good and I hoped to receive a nominal rent…

OP posts:
MotherOfPuffling · 21/02/2023 22:42

Well it’s what I was told when I sold my two properties, so 🤷‍♀️

VeggieSalsa · 22/02/2023 07:34

MotherOfPuffling · 21/02/2023 22:42

Well it’s what I was told when I sold my two properties, so 🤷‍♀️

I think the rules you quoted were for stamp duty main residence…

halfsiesonapotnoodle · 22/02/2023 07:42

Op, see an accountant. They will give you absolute clarity on the position.

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