Capital gains tax on house sale ? advice please.
i was speaking with someone today , who kinda knows what he's talking
about , basically i own my house that i live in and i'm thinking about
buying a 2nd property to rent out , any way he said i'd be better for tax
reasons to move from my house into the other house that i would purchase
and live there for around 2 years and rent out my current property, as i
would then avoid capital gains tax on my current residence if sold and also
in my new property when i come to sell or indeed ever sell , simply by
living at the property for some time..... so i kinda guess if this is the
case , if i want to avoid capital gains tax on any house sale in the future
, i guess if i buy a property live in it for two years then move on , rent
that one and buy another etc etc .....i presume this to be incorrect , but
tax rules are a funny thing.
But i was wondering if this is indeed the case , is there some kind of time
in which i have to sell my first property or is it fully exempt from capital
gains tax as i have lived in the property for around 10 years......can
anyone confirm this or can reccomend anyone i should speak with such as the
tax people etc ?
-He doesn't know quite as much as he thinks. Your principle private
residence is exempt form CGT but if you move out of it and rent it out
then the gain is taxable in direct proportion to the period that it was
rented out and when it was your PPR, BUT you get an extra 3 years of
PPR as well.
So, Live in house for 4 years, move out and rent it out for 5 years.
Taxable gain is Actual Gain x (4 + 3) / (4 + 5). You may also get
letting relief.
So if you sell the house within 3 years of leaving it you have no tax to
pay on it but you will only get one lot of direct PPR at a time.