CGT advice if rent out

[Gaz Bancroft]

Hello,

 

So I have completed a self-build property and have been living in it for nearly a year. I’m a single guy and I’ve been told about a potential job opportunity which would mean I’d have to relocate. I would rather keep my self build and rent it out and rent somewhere else to live for a while, at least until I decide if the move is right for me. 
 

Would there be a capital gains tax liability? I understand if I rent somewhere else and rent my self build out it’s no longer my primary residence? In which case would my capital gains tax liability be on any increase in value from what’s it’s worth now to when I come to sell in future? Or if the gain is calculated as a proportion of the increase in value inclusive of the value added from doing the self build (I.e value when sell less costs and land cost) then I suspect it’s not going to be worth me renting it out. 
 

I appreciate I should take specialist tax advice as this is a bit of a unique situation, but opinions welcome as I’m just weighing up options at the moment. 
 

Thank you in advance 

[Stewpot]

It will affect your CGT liability. But stand by for any changes in the budget next week.

 

IIRC, at the moment, if you let out the property, the CGT will apply to the proportion of the gain that happened when it wasn't your main residence. The 'gain' as I understand it, is measured as the difference between what you paid for the land, and what you eventually sell it for, minus all the capital expenses of the build, etc. You then work out, pro rata, how much of that gain is applicable to the time that you let it, so if you own the property for, say ten years, but it is let out for one year, then one tenth of the gain attracts CGT. You can then subtract the Annual Exemp Amount, if it still exists by then, and multiply it by the relevant tax rate. You'll have to look up what the current tax rates are - property rates are different from other stuff, and this may change in the budget.

 

Having said all that, I'm not an accountant, and I would highly recommend 20 minutes of their expensive time to make sure you have all the details.

 

Edited 7 hours ago by Stewpot

[-rick-]

If you claimed a self-build CIL exemption for your build and move out before 3 years after completion you may become liable to pay CIL. It can be a lot of money so check this as well.

[Gaz Bancroft]

No CIL in my area fortunately so I’m ok there. I’ve lived here for a year and if I sell it will be due to moving for a job so I’m hoping should be ok with HMRC

[BadgerBodger]

Rent a room scheme protects cgt liability but limits earning capacity?

[Gaz Bancroft]

Thank you Stewpot I thought that might be the case which is frustrating. I’ve made a fair gain in terms of what the property is worth now compared to the build and land cost. So having to pay CGT on a proportion of that would likely render renting it out pointless. I’d be better off leaving it empty for a year and keeping it as my primary residence I suspect. I am loathe to sell until I know for sure I want to move, it’s a lovely house just potentially now in the wrong location!! 

[Stewpot]

Beware of Council Tax liability with that. Councils don't like empty properties, and some apply big increases in CT on them - you won't be able to claim single-occupancy relief, either. Also check what your insurance says about leaving the property unoccupied.

 

[Gaz Bancroft]

Hmm yeah didn’t think of the council tax implications, they don’t make it easy do they! My slightly left field option would be to keep the house, maybe rent out a room up to £7,500 per year so no tax. And buy a campervan that I could live in during the week to see how I get on with the new job before making any permanent moves. Thanks for the advice all, food for thought