Capital Gains Tax

[connylad]

Hi - simple one for a potential landlord - how long must a person own a property before it is not liable for CGT? Is CGT unavoidable? Is this dependant on whether a person lives in the property or not? (Treated as their home)

Any advice on CGT and how to minimise or avoid it appreciated

Thanks

[plym77]

Hi

If the property is your Principal Private Resideence (PPR) it will be completely exempt from CGT.

If it is never your PPR you will always be subject to the CGT regime if you have made a gain on the sale of the property. There are various reliefs avaiable so it would depend of the profit on sale and the length of ownership whether you end up paying CGT.

Taper Relief - after 3 years of ownership you begin to receive relief by reducing the calculated gain by a % each year up to 10 years. In year 3 you can reduce the gain by 5%, then year 4, by 10%, and so on - maximum relief is therefore 40% (this is Non Business Asset Taper Relief - if the property is commercial Business Asset Taper Relief may be available and is alot more generous).

You will also be entitled to a CGT annual exemption (currently 8800) - if there are two owners you would get t exemptions - note that this is providing that the exemptions havenet been used against other CGT disposals in the year!

If you live in the property and subsequenty let it then whilst some of the period of ownership may become subject to CGT, there will be further reliefs available. The last 36 months of ownership will be deemed PPR and thus exempt (by virtue of the property having been your PPR at some point), plus lettings relief up to a maximum of £40,000 per owner (I say this as sometimes a property is owned joinly with a partner). Also, if you leave and then return to the property then it is possible that in some circumstances that the period of absence would also be covered by PPR exemption.

Basically, to establish whether there would be CGT payable will depend on a number of factors and should be reviewed individually.

I hope this helps, if you need further clarification please shout, but note that after today I will not be on the forum until mid-september so reply today if possible.

Regards

Sherena