CGT allowance for owner occupied period

[Bouleversee]

I haven't let a property for many years but when I sold my first home after I got married and then let it for a while, there was a pro-rata allowance for the number of years I had lived there and it was my only property at that time. I am aware that the c.g.t. allowance for properties is to be reduced next year but haven't seen anything about the owner occupier allowance against cgt when it is sold. Can anyone enlighten me for my daughter's benefit?

[monabri]

I haven't let a property for many years but when I sold my first home after I got married and then let it for a while, there was a pro-rata allowance for the number of years I had lived there and it was my only property at that time. I am aware that the c.g.t. allowance for properties is to be reduced next year but haven't seen anything about the owner occupier allowance against cgt when it is sold. Can anyone enlighten me for my daughter's benefit?

"Private Residence Relief".

I think it is unchanged from your pro-rata understanding....here's a link with an example calculation. The link is to an article dated 23 Jan 2023.

https://www.unbiased.co.uk/discover/mor ... 0allowance.

"For example, if you bought a property in January 2010 for £100,000 and sold it in January 2020 for £150,000, you’ve made a capital gain of £50,000. However, for the first five years (60 months) it was your main residence, and for the final five you let it out. Under PRR rules you’d be entitled to relief covering 69 months out of the 120 months you owned the property – the first 60 months you lived there plus the final nine months prior to the sale. In this example, that relief would equal £28,750 – which is calculated as (£50,000/120 months) x 69 months. So you’d be taxed only on £21,250 of the capital gain."

[Lootman]

I haven't let a property for many years but when I sold my first home after I got married and then let it for a while, there was a pro-rata allowance for the number of years I had lived there and it was my only property at that time. I am aware that the c.g.t. allowance for properties is to be reduced next year but haven't seen anything about the owner occupier allowance against cgt when it is sold. Can anyone enlighten me for my daughter's benefit?

"Private Residence Relief".

I think it is unchanged from your pro-rata understanding.

It is a while since I had to look into this topic. But I recall that it used to be the case that, if you owned more than one property, then you could elect which one to designate as your primary residence.

And since you only need to make that declaration when you sell a property, there is some flexibility to make that designation favourably.

[monabri]

It is a while since I had to look into this topic. But I recall that it used to be the case that, if you owned more than one property, then you could elect which one to designate as your primary residence.

And since you only need to make that declaration when you sell a property, there is some flexibility to make that designation favourably.

That sounds very dodgy, especially if you've been renting it out and there will be evidence in the form of council tax bills, utilities, rental payments all in someone else's name to state that it wasn't your primary residence.

[Lootman]

It is a while since I had to look into this topic. But I recall that it used to be the case that, if you owned more than one property, then you could elect which one to designate as your primary residence.

And since you only need to make that declaration when you sell a property, there is some flexibility to make that designation favourably.

That sounds very dodgy, especially if you've been renting it out and there will be evidence in the form of council tax bills, utilities, rental payments all in someone else's name to state that it wasn't your primary residence.

Yes probably. I was thinking more of the situation where you have a home in London and a second home in the country.

[Bouleversee]

Thanks both. Will study later. It wasn't bought as buy-to-let. They moved house to be near to a particular school and decided to borrow and let it out and possibly return to it after the kids left school but are not sure they want to do the latter now. Needs a lot of thought, with increased mortgage rates, difficulty in raising rents and cgt and friends established where they are.

I have to say I think it is outrageous that tax allowances are not increased in line with inflation and we are taxed on effectively fictitious gains. I remember indexation of capital gains being introduced years ago following battling from me and others but then axed after a short time. Kenneth Clarke's excuse in a letter to me said it was because it was being abused. So why not just deal with the abuse?!!!

[bluedonkey]

"Private Residence Relief".

I think it is unchanged from your pro-rata understanding.

It is a while since I had to look into this topic. But I recall that it used to be the case that, if you owned more than one property, then you could elect which one to designate as your primary residence.

And since you only need to make that declaration when you sell a property, there is some flexibility to make that designation favourably.

Not quite. You have to make the declaration of main residence within 2 years of having two residences. NB a residence for these purposes also includes one where the taxpayer is the lessee even though no CGT can be in point for it.

[Lootman]

It is a while since I had to look into this topic. But I recall that it used to be the case that, if you owned more than one property, then you could elect which one to designate as your primary residence.

And since you only need to make that declaration when you sell a property, there is some flexibility to make that designation favourably.

Not quite. You have to make the declaration of main residence within 2 years of having two residences. NB a residence for these purposes also includes one where the taxpayer is the lessee even though no CGT can be in point for it.

Hmm, OK, but how in practice is one supposed to make that declaration after 2 years? The normal SA tax return does not ask for it. Are you supposed to send a letter?

If you choose property A as your PPR for a period of time then clearly you cannot later designate that same time period as your PPR for property B. So at best you are only deferring CGT and not avoiding it.

[bluedonkey]

Yes a letter.

[Dod101]

Thanks both. Will study later. It wasn't bought as buy-to-let. They moved house to be near to a particular school and decided to borrow and let it out and possibly return to it after the kids left school but are not sure they want to do the latter now. Needs a lot of thought, with increased mortgage rates, difficulty in raising rents and cgt and friends established where they are.

I have to say I think it is outrageous that tax allowances are not increased in line with inflation and we are taxed on effectively fictitious gains. I remember indexation of capital gains being introduced years ago following battling from me and others but then axed after a short time. Kenneth Clarke's excuse in a letter to me said it was because it was being abused. So why not just deal with the abuse?!!!

You will just have to console yourself with the fact that owner occupied houses are free from CGT and the huge gains of the last 20 years and more have a lot to do with inflation.

Dod

[monabri]

Thanks both. Will study later. It wasn't bought as buy-to-let. They moved house to be near to a particular school and decided to borrow and let it out and possibly return to it after the kids left school but are not sure they want to do the latter now. Needs a lot of thought, with increased mortgage rates, difficulty in raising rents and cgt and friends established where they are.

I have to say I think it is outrageous that tax allowances are not increased in line with inflation and we are taxed on effectively fictitious gains. I remember indexation of capital gains being introduced years ago following battling from me and others but then axed after a short time. Kenneth Clarke's excuse in a letter to me said it was because it was being abused. So why not just deal with the abuse?!!!

You will just have to console yourself with the fact that owner occupied houses are free from CGT and the huge gains of the last 20 years and more have a lot to do with inflation.

Dod

It will pay for a better class of care home (if one is unlucky enough to have the need).

[Bouleversee]

Thanks both. Will study later. It wasn't bought as buy-to-let. They moved house to be near to a particular school and decided to borrow and let it out and possibly return to it after the kids left school but are not sure they want to do the latter now. Needs a lot of thought, with increased mortgage rates, difficulty in raising rents and cgt and friends established where they are.

I have to say I think it is outrageous that tax allowances are not increased in line with inflation and we are taxed on effectively fictitious gains. I remember indexation of capital gains being introduced years ago following battling from me and others but then axed after a short time. Kenneth Clarke's excuse in a letter to me said it was because it was being abused. So why not just deal with the abuse?!!!

You will just have to console yourself with the fact that owner occupied houses are free from CGT and the huge gains of the last 20 years and more have a lot to do with inflation.

Dod

Only if one has not downsized in the meantime (as in my case), or moved and let for a few years, as in my daughter's. In real terms, after tax and expenses they won't have made all that much. I wasn't only thinking about in relation to property anyway. It seems absurd to reduce allowances and increase taxes on dividend income in times of high inflation and expect to achieve economic growth when everyone has less money to spend on non-essentials unless they liquidate their investments, of course, and hold out their hands for benefits in later years.