Capital Gains Tax for Accidental Landlords

 

It’s not uncommon for people to find themselves as accidental landlords, whether it’s couples moving in together or being left a property in a will.  Whilst the property is being let out income and expenses will be reported on an annual self-assessment tax return, and income tax
due on any profits made. 

 

But what tax implications are there when the time comes to sell the property?  If the property sells for more than it cost (after taking account of capital improvements, purchase and selling costs) then there will be a capital gain on the property, which may result in capital gains tax.  The good news is that once various reliefs and exemptions are applied the capital gains tax bill
should be significantly reduced. 

 

• Depending on the circumstances the following could be utilised to reduce the tax liability:
• Annual exemption – for 2015/16 no tax is paid on the first £11,100 of capital gains in the tax year.
• Principal private residence (PPR) relief – if you have lived in the house as your main residence then no capital gains tax will be payable on that period.
• Last 18 months – For a property that has been your PPR then HMRC assume that you lived there for the last 18 months, even if it was rented out in that period.
• Lettings relief – A tax relief calculated as

 

So accidental landlords, speak to us before you sell to make sure that you’re minimising your capital gains tax liability.