Downsizing House - Tax query and advice?

16
Posted 25th JulEdited by:"MarioMan"
So e.g

If a house was purchased for around £80k a few decade ago and is now worth £300k at today value. If I were to sell that house for £300k and downsize and buy a new house for £150k.

The house was let out for rent for a year.



Would I be liable to pay any taxes or CGTs, on the £150k Profit?


Thank you
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16 Comments
Not if its your main residence you are selling.
m4rmite25/07/2020 15:43

https://www.gov.uk/tax-sell-home


  • you have one home and you’ve lived in it as your main home for all the time you’ve owned it
  • you have not let part of it out


The house was let out for rent, for a year
I believe (but not certain because yours was for a short period) if you have rented out the property you’ll have to pay CGT which will be on the profit of £220k if you bought it for £80k and are selling for £300k. 28% of £220k you’ll owe the tax man (£61600), minus some smart moves by your accountant. Recently had to pay this horrendous tax myself which personally I think is a joke. There are rumours of it increasing to fall in line with income tax rates of up to 45%.

theguardian.com/mon…rty It gets very confusing in a situation like yours. Speak to an accountant to get them to work out how much you’d pay.
Edited by: "Kratos69" 25th Jul
you have to declare to HMRC capital gains and the one year that is let out will be taken into account in the calculation as well as how long you have lived there yourself. there are allowances because you had lived there, and if the let length is quite short in comparison to how long you live there yourself, then the allowances will be more than the capital gains tax on the let length.

all the details are on HMRC website.
Not sure its a great idea to be asking for CGT advice on HUKD. You'd be better off paying an accoutant £500 to help you.
ArcadeAssassin25/07/2020 15:42

Not if its your main residence you are selling.


You don't get letting relief anymore so the apportioned gain made during the year of letting probably will be chargeable to CGT.
Kratos6925/07/2020 16:06

I believe (but not certain because yours was for a short period) if you …I believe (but not certain because yours was for a short period) if you have rented out the property you’ll have to pay CGT which will be on the profit of £220k if you bought it for £80k and are selling for £300k. 28% of £220k you’ll owe the tax man (£61600), minus some smart moves by your accountant. Recently had to pay this horrendous tax myself which personally I think is a joke. There are rumours of it increasing to fall in line with income tax rates of up to 45%.https://www.theguardian.com/money/2014/aug/21/capital-gains-tax-on-let-property It gets very confusing in a situation like yours. Speak to an accountant to get them to work out how much you’d pay.


The CGT would only be chargeable on the whole profit if it was never his PPR. If he has lived in the property he'd probably qualify for PRR on the gain made during that time, plus the last 9 months of ownership regardless.
Edited by: "nag_sup" 25th Jul
nag_sup25/07/2020 17:24

You don't get letting relief anymore so the apportioned gain made during …You don't get letting relief anymore so the apportioned gain made during the year of letting probably will be chargeable to CGT.



Cheers but I answered the Op when the original question was two lines about difference in purchase price and sale price. There was no mention of rent or anything extra that has been added.
ArcadeAssassin25/07/2020 17:30

Cheers but I answered the Op when the original question was two lines …Cheers but I answered the Op when the original question was two lines about difference in purchase price and sale price. There was no mention of rent or anything extra that has been added.


Ahh ok. Wasn't saying you were wrong, just trying to help
nag_sup25/07/2020 17:26

The CGT would only be chargeable on the whole profit if it was never his …The CGT would only be chargeable on the whole profit if it was never his PPR. If he has lived in the property he'd probably qualify for PRR on the gain made during that time, plus the last 9 months of ownership regardless.


Yeah what I said was probably wrong and my own CGT was a much simpler thing to work out even though an accountant did it. I’d definitely recommend just hiring one.
Kratos6925/07/2020 17:35

Yeah what I said was probably wrong and my own CGT was a much simpler …Yeah what I said was probably wrong and my own CGT was a much simpler thing to work out even though an accountant did it. I’d definitely recommend just hiring one.


Makes sense, you pay £500 for decades of experience and peace of mind that you haven't underpaid CGT.
nag_sup25/07/2020 17:44

Makes sense, you pay £500 for decades of experience and peace of mind that …Makes sense, you pay £500 for decades of experience and peace of mind that you haven't underpaid CGT.


Especially in OPs position, I wouldn’t know where to start.
Did you declare the rental income to hmrc when you rented it out?
Wadda25/07/2020 20:55

Did you declare the rental income to hmrc when you rented it out?


Yes
Did you own another house at the time it was rented Out?

this website has a example of how the cat will be worked out. Scroll down To How letting relief works in 2019-20
which.co.uk/mon…00f
Edited by: "Wadda" 25th Jul
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