Dear All,
I bought my first home in Spring 1996 for £44k. I lived in it for 5.5 years until Autumn 2001, when I moved to Germany as an ex-pat for my work. The market value of the house at that time was £90k, and I started letting the property in December 2001.
I returned to the UK in February 2004 and because my family had outgrown that first home, we did not move back in. Instead we bought a second property in the May 2004, and continued to let the first home.
I am in position now to either sell or continue to let that first home. It's current market value is £135k.
My question is, what figures do I use for the CGT calculation. Do I use the original purchase price of £44k, or the value when it was first let i.e. £90k, or maybe even the value of the property at the end of taper relief?
If I were to sell the property now, my understanding is that the CGT calculation would go something like this:
Period owned = 10.25
Period resided + Taper relief = 5.5 + 3 = 8.5
Taxable Gain = 135k - 44k (?) = £91k
Calculation: (10.25-8.5)/10.25 x 91k = £15.5k
Furthermore, my understanding is that as this falls below the £40k threshold, no CGT would be payable. Is my understanding correct?
Obviously with such a significant amount of Taxable Gain coupled with the diminishing effect of the Taper relief, I am concerned about crossing the threshold, and suddenly seeing the equity I've built up in my first home suddenly disappearing in CGT.
This concern is impacting the decision whether to sell now or continue to let. Indeed I have a prospective tenant currently waiting on my decision and so any input you can give is sincerely appreciated,
Best regards,
Andy.
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