Q Could you please help? In 1984, I purchased a house and lived there with my late wife until August 2015. I then rented the house out and moved in with a friend as I didn’t want to live there anymore (too many memories). I would now like to sell the house and buy another in a different area to live in on my own. Would I be liable for any tax, doing this? TA
A If the house you end up buying costs more than £125,000, you will definitely have to pay stamp duty land tax (SDLT) and you can work out exactly how much using our handy SDLT calculator.
There may also be a capital gains tax (CGT) bill. If you had sold your old property within 18 months of moving out, there wouldn’t be a CGT bill. That is because you would have been eligible for what’s called “private residence relief” on the whole of the gain even though you didn’t live in the property for the whole time you owned it.
However, as you are selling after 18 months of moving out, only part of the gain you make – the gain being the sale price less the purchase price less expenses such as legal fees, estate agency fees and SDLT – will attract private residence relief.
To work this out, you add 18 to the number of months you actually lived in the property, then divide this figure by the number of months you owned it. You then multiply the gain you made on selling the property by this fraction to arrive at the figure that tells you how much of the gain is tax-free because of private residence relief.
To see what your taxable gain is, you take the gain you made on selling then deduct the figure for private residence relief and then the figure for lettings relief. You are off the hook if this comes to less than the CGT-exempt amount of £11,300 (in the 2017-18 tax year). Otherwise you will pay tax at 10% or 20% on any amount over £11,300.
Finally, to answer another reader’s question, if you are married and sell a jointly owned asset, you each have an CGT-exempt amount to put against your share of any gain.