Selling a house - CGT

Aug 25, 2004 6 Replies
J

Hi all,



Yet another question about CGT - sorry ;-)



I have a small terrace house that I lived in until last year but is not now my principle residence. The house was gifted to me about 4 years ago and is currently rented out and the income declared on my tax.



I am looking at selling it and adding a bit extra to buy a bigger house in a less expensive area.



My questions are:


1) Would I have to pay CGT if I was reinvesting the money into another property?
2) Would I have to pay CGT on the full sale price?

If I have to pay a substantial amount of CGT would it be better in your opinions for me not to sell the property but instead to get a mortgage against the value of the house?



Sorry for all the questions but any advice would be greatly appreciated!



Thanks



John


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T

(1) is irrelevant as to whether you pay tax or not.

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D

  1. Reinvestment will not reduce the CGT. However, as it has been your PPR, the last 3 years of ownership are exempt. This should mean that no CGT is payable if the sale takes place within the next 2 years.
  2. No - only on the gain. The "gross" gain is the difference between the sale price and probate value - less allowable expenses and other reliefs (e.g. taper relief and Lettings Relief).
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J

Doug,

Many thanks for the reply - can I confirm that I haven't lived in the property since last year - is your response still correct and no CGT would be payable?

Thanks again

John

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D

Um, where did that come from? Dealing with a few Wills recently, so must be in my sub-conscious. :)

It should be market value - unless the "gift" arose from the Will. :)

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D

Yes, the property only needs to be your PPR at some time to qualify for the last 36 months exemption.

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