CGT on sale of 1st property

[hallsy]

I bought a house in December 1998 for £68,000. After extensive refurbishment works spending approximately £40,000 over a period of eight months i moved into the property after living with parents.
In October 2002 I had the property valued at £225,000. I decided to remortgage £140,000 and purchased a 2nd property for £180,000.
The 1st property I then rented to students.
I am considering selling the 1st property in 2004
its current valuation is £250,000. Will I have to pay any CGT ?
Thanks, Darren.

[accountant@uktaxshop]

Darren,

There should be no CGT arising as the moment on the sale of the rental property.

This is due to two handy reliefs:

1. By concession if you are unable to occupy the house due to refurbishments being required, up to 12 months (i.e. your 8 months) can be treated as if the house was your main residence.
2. By concession the final three years of ownership is also treated as if you still live in the property.

Therefore you have full PPR relief available to you on the sale. Although you do of course still need to record this on your 2003/4 tax return if you do sell this year, along with your rental income.

If you are looking more widely at your options, you may be able to own the property for an even longer period than 36 months since you moved out CGT free, due to the availability of other reliefs taper relief, lettings relief and your personal allowance. It may be worth doing some projections on how long you can rent out for whilst being CGT free.

If I can be of further assistance, please let me know.

Regards

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436

[Ian McTernan CTA]

The question that hasn't been asked or answered here concerns mortgage interest relief, for which I would refer you to other postings. No interest relief is due on a proportion of the remortgage over the original mortgage unless the funds were used on buy to let properties, and I am assuming that the second property is used by you.

Don't forget to include the rental income and expenses in your Tax Return.

Ian McTernan CTA
McTernan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com