CGT on sale of my only property which I let out.

[pam1]

I currently live in London in a rented property and cannot afford to get on the housing ladder here, therefore I bought a new flat in the northwest which I let out. This property has increased substantially in value (approx £40K) and I am intending to sell this to provide a large enough deposit to buy in London. When I sell this will I still be liable for CGT as this is my only property, and I intend to re-invest the money, if so how can I minimise the CGT, Many thanks in advance

[Instinctive]

REPLY:

Unfortunately, the sale of the property in the North West will be liable to Capital Gains Tax. It may be your only property but it does not help if it has never been your only or main residence.

There is no reinvestment relief for buying a residential property in London, so no hope here either.

The only possibility is for you to make this property your MAIN RESIDENCE after the tenant has vacated the property. You must be able to demonstrate that this is your actual residence by reference to QUALITY of occupation as opposed to quantity. Eg, you could spend your working days in London and visit the North West at holidays or weekend. Where you have more than one residence as a matter of fact (you also have one in London, and it does not matter that it is rented by you), you could decide which is to be treated as your main residence for Capital Gains Tax purposes by making an election to that effect to the Tax office. Such an election could be back-dated by upto 2 years in certain circumstances, although this is not likely to be relevant in your case.

Finally, the Capital Gains Tax on £40,000 could amount to approximately £12,000, assuming the gains are all taxed at the higher rate of 40%.

RP

[pam1]

Many thanks for you reply and the information you provided. You say that I must be able to demonstrate this is my actual residence, how do i do this, utility bills, council tax bills etc?

thanks again