CGT question and lettings relif

Landlord Discussion
1

Hi,

I wonder if there’s anyone here who could help me with a capital gains tax question?

20 years ago, I bought a house for £250,000 and I am hoping to sell it for 650,000 I lived in it for 14 years so it was my principal home. I then rented it out for 6 years.
I understand I am entitled to private residence, relief of 14/20 which is 70%.

So the key numbers are

Bought £250,000
Sell £650,000
Improvements £70,500

Total gain £329,500

Reliefs used
Private residents relief £230,649 [14/20 = 70% ]
Capital Gains Tax Annual Exempt Amount used £6000
Total deductions £236,649

Total gain £92,851

I am a lower rate tax payer as I will earn £6000 this year so I am expecting to pay:
£37,700 taxable gain multiplied by 18% tax rate £6,786
£55,151 taxable gain multiplied by 28% tax rate £15,442.28

Tax to pay £22,228.28

So my main question is am I entitled to lettings relief? When the house was my principal residency, I rented a room to a lodger for six years. I understand that there is a letting relief entitlement of £40,000. Does anyone know how this works?

Thanks Joe

2

For the cgt calc the last 9 months are treated as if you live there so your relief is 14.75/20.

Lettings relief is where you also lived there at same time as your tenants ie you only rented part of the property. The £40k is a cap on entitlement. Assuming you rented whole property this doesnt apply.

3

Youre also forgetting sales and purchase costs - stamp duty, legal fees, estste agent costs etc.

4

This topic was automatically closed 90 days after the last reply. New replies are no longer allowed.