The Tax Resources Blog

Posts Tagged ‘property’

Capital Gains Tax Rental Home

Question: Capital Gains Tax on 2nd home? Adcive please re: sale?

Can anyone explain CGT to me please? I have lived in my property for 12 years and paid off the mortgage in full. I then married and moved into another house, both names on the mortgage & still mortgaged.

Basically the profit from my first home from purchase price to sale price will be approx ££75k if i sell (not taking into account fees)

I have decided to rent the 1st home for 12 months maybe 2 years maximum. I have minimal rental income from this that is under the threashold for income tax at the end of the financial year. However I didnt realise I would pay CGT on profit from the sale because it has been rented… is this correct?

Will i have to pay CGT on the whole profit from the sale or just part of the profit from date of rental to sale date??

Hope you can understand what im trying to ask.. please help!!

Answer: This question is extremely in depth and it would be necessary to seek the advice of an accountant and mortgage broker to ensure an accurate calculation be given however the following should apply.

http://www.wwfp.net/mortgage/mortgage-broker.html

Within the Principal private residence relief rules, the 1st house would have a 36 month exemption period on its sale. This essentially means upon its sale, whatever you have done in the previous 3 years, irrespective of whether or not it was being rented or lived in, is ignored.

Therefore, as long as you sell the property within 3 years from moving out of it, there would be no CGT liability at all.

Disclaimer:
The answers above are for guidance only and should not be acted upon without you receiving professional mortgage advice relevant to your circumstances. To find an independent mortgage adviser please go to http://www.impartial.co.uk.

Comparison of two property markets in Perth with solid rental yields