Capital Gains Tax

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newbuild05

Registered User
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Hi all
Just a quick query. Myself and my cousin have been trying to sell our house now for the last 6 months but with no joy. i have recently finished my new house and am in the process of moving everything in and he has moved away from the area so neither if us is living in the house.

Since we cant sell it we are thinking of renting it for a while then trying to sell it again maybe in 6 months to a year. My question is will we be subject to capital gains tax if we do sell after renting it out for 6 months to a year even though we dont have many options at the moment other than renting as we cant sell??

Thanks all
 
CGT becomes an issue if you don't sell it within 12 months of vacating it as your PPR/home regardless of it being rented etc. If you rent the property within 2 years of purchase as an owner occupied PPR/home then a clawback of stamp duty will apply. There are obviously other implications of renting the property out as summarised in the Property Investment FAQ and key posts.

If you can't sell at the moment then there is one obvious option - drop the price to attract interest.
 
Hi Clubman

Regarding your last post about CGT - I'd be really grateful if you would help me clarify the following:

We have had our house for sale for 12 months and following a price reduction we are hopefully close to being sale agreed. We lived there until May of '07, it was empty until December '07 after which we started renting it out on a 6 month lease (ends June '08). In May '08 we will have owned the house for 5 years. If we sell it within the next few months will we have to pay CGT?

I have the brochure from Revenue about how to calculate CGT and after several conversations with them I still dont understand how to do it.

If we sell for say: E260,000 and our outstanding mortgage is half that, plus solicitors and estate agent fees - based on renting it for 6 months how much CGT would we pay?

I am self employed and my partner is PAYE/part time student. We are currently renting and do not intend on buying another property for several years.

Many thanks,
Ann Marie
 
If you can't sell at the moment then there is one obvious option - drop the price to attract interest
Click to expand...

A quick way to sell is to drop the price by 25% below the average for your area - you'll attract quick interest and no doubt bids and should find a higher level to sell at. (I got this tip from someone in the UK who got through the 1980s/90s property crash there).

Needless to say you'd have to weigh up the cost (i.e. several months of mortgage etc.) v. a quick sale.

Personally I think I would rent it asap though.
 
Ann Marie said:
We have had our house for sale for 12 months and following a price reduction we are hopefully close to being sale agreed. We lived there until May of '07, it was empty until December '07 after which we started renting it out on a 6 month lease (ends June '08). In May '08 we will have owned the house for 5 years. If we sell it within the next few months will we have to pay CGT?
Click to expand...
If you don't sell the house within 12 months of vacating it as you home then you will be liable for CGT on some portion of any resale value. The 5 years ownership period is irrelevant.
If we sell for say: E260,000 and our outstanding mortgage is half that, plus solicitors and estate agent fees - based on renting it for 6 months how much CGT would we pay?
Click to expand...
The mortgage outstanding is irrelevant. The easiest way to look at this is by an example:

If you lived in the property for 4 years and then moved out and sold it 2 years later then (2 - 1)/(4 + 2) = 1/6th of any overall gain (i.e. sale price minus acquisition price minus any allowable expenses minus any previously incurred capital losses minus annual CGT allowance) will be subject to 20% CGT.
I am self employed and my partner is PAYE/part time student. We are currently renting and do not intend on buying another property for several years.
Click to expand...
These details are irrelevant to the CGT issue.

Don't forget your liability for income tax on rental income.
 
ClubMan; said:
If you don't sell the house within 12 months of vacating it as you home then you will be liable for CGT on some portion of any resale value.
Click to expand...
Hi Clubman

Many thanks for your reply which is very helpful.

Regarding selling house 12 months after we vacated it - how is the vacation date worked out? Is it based on when we stopped paying the mortgage? We continued to pay mortgage on house for 5 months after we had left and only rented it out then - does that matter?

Thanks again.

Ann Marie
 
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