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I lived in my house for six years before renting it out in 2006 and I have now just sold it. Do I have to pay tax on the whole profit or will I just pay tax on the period it was let for. Any help greatly appreciated.
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824Actually you should pay less than either of your 2 alternatives.
First of all you calculate the gain after all the expenses of buying and selling have been taken into account.
If you have at any time been an owner/occupier of the property as your principal private residence you apportion the profit by taking the period over which it was for rent after ignoring the last 3 years before sale divided by the total period of ownership.
Then you have the Capital Gains Tax exemption limit for the year of sale.
Mike
Posted on 02 February 2012 |
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824I should have said that 2012-2006 = 6 years plus 6 years before makes 12.
Ignoring the last 3 years means that only a quarter of the gain is liable for tax(3/12) and that is reduced by the annual allowance which is £10,600 for 2011/12.
Whatever the resulting gain is will be taxed according to whether there is any remaining basic rate band. If so, that portion would be charged at 18% and the remainder at 28%.
Mike
Posted on 02 February 2012 | Love 0 loves
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