From: gingerdazza@yahoo.com
Newsgroups: uk.finance
Subject: Re: CGT on Second Property
Date: 12 Jul 2006 06:32:29 -0700
   posting-account=s-uqTQ0AAAANshbTjOGt-_Dua9j-whRQ

Ronald, I really appreciate your help. Thanks very much

Ronald Raygun wrote:
> gingerdazza@yahoo.com wrote:
>
> > I purchased a flat in 2000 for =A350k. Lived there for 4 years.
> > Remortgaged it for =A3100k with Buy To Let mortgage in 2004 to free up
> > capital to purchase new house which I have lived in since. At time flat
> > was worth =A3120k. Still worth around =A3120-125k
>
> OK, for CGT purposes, the value at the time of change of status is not
> relevant.  The gain on which tax would be based would be =A370-75k if you
> sold now.
>
> > If I sell my flat now, or in future, what is my CGT liability?
>
> If now, none.  If later, it depends.
>
> > I heard something about a 3 year rule that would possibly mean I dont
> > have to pay CGTY if I sell within 3 years - true?
>
> Yes.  More precisely, all the gain is always taxable, but if the place
> has been your main home during 100% of the time you owned it, then
> you get 100% relief and so pay nothing.  If it has been your home for
> only 70% of the time, you only get 70% relief, etc.
>
> But, if it has ever been your main home, then the last 3 years of
> ownership count as though it was your home during them too, even if
> it wasn't.  So if you live in it for the first 4 years, then use it
> as a second home for 3, then sell, you still get 100% private residence
> relief.
>
> Also, if you rent it out, and you get some PRR, then you also get
> letting relief for any periods not covered by the PRR during which
> it was let (but the LR has a ceiling of =A340k or the amount of PRR,
> whichever is lower).
>
> In practice this means that if, say, you waited until 2010 to sell,
> you would have 10 years of ownership of which 7 qualify for PRR and
> 3 for LR.  Suppose the value then were as much as 200k, then the gain
> would be 150k.  70% of this would be free due to PPR status, and 30%
> would be eligible for LR.  But 30% of 150k is 45k, and the LR ceiling
> is 40k, so =A35k would be taxable.  But this is below your annual
> exemption, so there will still be no tax to pay.
>
> > If I were to move back into the property for a period of time, would
> > that remove my CGT liability? What sort of time period?
>
> Well, there isn't any liability yet which would need removed, nor will
> there be for some time.  Once there is, moving back in won't really help
> unless you do so for more than 3 years, unless you subsequently move out
> again before selling.  This is because the last three years qualify for
> PPR status already, and moving in doesn't therefore improve your position.