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Where Taxpayers and Advisers Meet

How much CGT is owed; if any? (Gifted property, lived in, later let out, now selling?)

Joined:Fri Jun 11, 2021 9:58 am
How much CGT is owed; if any? (Gifted property, lived in, later let out, now selling?)

Postby Kr335 » Fri Jun 11, 2021 10:10 am

Property is an ex-council house purchased through one of those discounted schemes to purchase the property at a reduced rate.

Mother and I moved into this property in 1994. She purchased the property in 2003. It was probably valued at approx £85k at that time but she got it for £16k.
We continued to live in it together until around 2011/2012.
She retired and moved to Spain, and she gifted the property to me in 2011. I paid all the legal fees etc but did not pay for the property itself. At the time of this gift; the house was worth around £90k.

I’ve lived in the house ever since, 2012 to present.

I am now looking at purchasing a new home to move into with my partner. The plan was to keep this house and let it out.

If I let it out for say, 5 years, and eventually sell it in 2026 for example. As it will be my second home at that point in time, I believe I will also have to pay CGT on the rise in value from when I originally acquired it to when I sold it.

Since I didn’t “buy” it in 2012, I assume the gain will be measured from the last recorded sale price of £16k in 2003 when my mother initially bought it?

I’d expect the house to sell now for approx £96k.

So that means the gain is £80k?

Am I right in saying the amount of time I lived in it is taken into account? Is this from when I owned it or back dated to include the length of time I lived in it?

If it’s just since I owned it, am I right in saying that at the point of sale, I would have owned it for (2012-2026) 14 years - as I lived in it for 9 of those years, the gain would be treated as 5/14th of the £80k or £28.5k.

I am on a high tax band, so I assume that means CGT owed is 28% of that £28.5k = £7,950. As this is below the £12k per year CGT allowance, does this ultimately mean I’d still pay £0?

Seems to good to be true but would be ideal if so.

Lastly, does the fact I am renting the house out from next year for the next 4-5 years give me any other tax allowances that might reduce CGT if I indeed to have to pay more than I thought? (I don’t know what Letting Relief is or if it also applies here?)

I am in Glasgow, Scotland.

Thanks for your time. Sorry for the long post!

Joined:Fri Jun 11, 2021 9:58 am

Re: How much CGT is owed; if any? (Gifted property, lived in, later let out, now selling?)

Postby Kr335 » Fri Jun 11, 2021 11:51 am

Sorry, I do not know how to edit my original post. The correction I tried to make was it was gifted to me in 2012, not 2011.

Joined:Mon Mar 11, 2019 4:22 pm

Re: How much CGT is owed; if any? (Gifted property, lived in, later let out, now selling?)

Postby Jholm » Fri Jun 11, 2021 1:59 pm

I assume when it was gifted to you, capital gains tax was paid at the time? This was a disposal for CGT purposes

Assuming the value of £90k when it was transferred to you, this becomes your cost. So a lot higher than you expected. The reason for this is that when it was transferred, CGT would (or should) have been paid on the gain at the time. Using the earlier cost would effectively mean double taxation on the earlier gain.

You're pretty much there with PPR relief. Eg. if you lived in it half the time it was owned, 50% of the gain would be reduced. There are periods that can be deemed occupied, which you should look into but at first glance, this does not seem relevant from what you have said.

Lettings relief has pretty much been scrapped, with PPR relief taking over.

However, it seems your gain would be below the annual exemption, so no tax due possibly.

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