Capital Gains Tax if you rent then sell your house

[Guest WhatNow?]

Hi - wonder if anyone has any direct experience of (as opposed to speculation about) selling their house in the UK after it has been rented for a while. My understanding is that, in theory, as it is no longer the family home, any proceeds from selling would be classed as Capital Gains and must be declared. In view of the fact that so many of us are coming over having left our houses rented out because we couldn't sell, this could be a major consideration. If the proceeds are put directly into Super, for example, does this make a difference?

[Guest Helchops]

If you're not a UK resident, it's not taxable in UK, and you cease to be a resident the moment you go to Oz on a PR visa. Not sure what the tax implications in Oz are, but would postulate nil.

[Guest WhatNow?]

Thanks Helchops but I don't think these days you can postulate anything about the tax system. The ATO and HMRC liaise and exchange information. And as to not being liable to pay tax in the UK, that is quite true however, I still have to complete a tax return as a non-resident landlord and make the same declarations of rental income in the UK as I do here. The two Tax Offices then compare notes to see if the correct sums have been declared. So no-one should assume anything. If you rent your property out through an estate agent in the UK, that agent is now obliged to register you as a non-resident landlord or risk their own licence.

 

By the way - I note you are from Cannock - my property is in Hammerwich and I am originally from Wednesfield. Small world eh?

[Guest two_chants]

Hi Whatnow and Helchops

 

This area is very complicated and has all sorts of rules and regulations and to say that you are not liable to tax in the UK I'm afraid is wrong. You are liable to UK tax and Australian tax but there are lots of relief's you can get against it and the ATO will take the UK tax you pay and offset it against your Australian tax.

 

Even though I am an accountant I am going to ask a tax specialist when the time comes as they are the only people who will know. I am also renting out my house here, carrying on work for a UK client and will eventually sell the property.

 

Its all good fun! But as I said find an expert, they will easily pay for themselves in the amount they can save you in tax and the headache from it all.

[Andrew from Vista Financial]

Hi Mandy

 

As mentioned you should seek specialist adivce on this for clarification.

 

Here are some points that may help though.

 

It is certainly possible that there will be tax implications in both UK and Australia on a gain, as two_chants has said there are lots of various exemptions/discounts etc that may mitigate or exempt a person from CGT.

 

 

The first point Mandy is, when did you cease being resident/ordinarily resident in the UK, if this was more than 5 full tax years ago (I believe it is according to your sig) then it seems you will be ok from a UK point of view, see here http://www.hmrc.gov.uk/cnr/faqs_capgains.htm (see specifically Q6 Aii).

 

Now in relation to a capital gains in Australia, generally the asset will be valued when you became Australian resident for tax purposes (remember this is not always the same as visa purposes), has the asset increased in value in Australian dollar terms since this time?

 

With the UK house price situation and exchange rate (strong Australian dollar) its possible that it hasn't, even if it has it may be possible to use the main resident exemption to mitigate some of this gain and you may need to explore this area further if there has been a gain from an Australian point of view.

 

If after all of this there has been a gain in Australia the 50% discount should apply (applies if the asset has been held for longer than 12 months), if the asset is jointly owned then the gain would be halved again.

 

Finally the remaining gain if any will be added to individual income for the relevant tax year and tax applied accordingly at the applicable individual rates.

 

Using Superannuation as a tool may be an option to mitigate any gains further but this would depend upon employment circumstances, age and various other factors.

 

So this clearly is a complex area and advice should be sought but you may still end up being ok.

 

HTH

 

Regards

 

Andy

[niknjas]

Does anybody know any experts in this field. Just about to rent our house out in UK and want to know that we are doing the right thing/ going downt he correct route

Thanks

[Guest Doug Booth]

If you do not purchase another house, then the UK property can continue to be treated as your main residence for up to six years, and therefore exempt from taxation for that period.

 

If you do purchase another property to live, then you will have to make a choice as to which property you want to treat as your main residence for taxation purposes.

[Elliot]

I was under the impression that once you moved to Australia your home in the UK would then be classed as a foreign investment and any income subject to tax as is the case with all other investments.

 

Regarding CGT though, I would hope that if you haven't actually bought anywhere to live in Australia and you are renting then maybe as Doug Booth says when you finally sell up it would be exempt from the tax but as always seek professional advice (may cost a bit but I'm sure not as much as the tax you would end up paying).

 

One thing I do know though is that there is no fixed rate for CGT in Australia, they simply consider the gain as income for that tax year and add it to your yearly salary. Obviously this could be good or bad. If you are not working then technically you are not earning and therefore the gain would be classed as your salary for the year with the differing tiers of tax rates. If you are earning enough to be close to the higher tax band anyway then the gain would definitely push you into the band and be taxed accordingly.

 

We have engaged an international tax/financial adviser for this purpose, still waiting for them to come up with the goods though.

 

Coming over for our 'reccie' trip on 1st March and arriving for good 12th September, yipee.

[tinkertailerdog]

capital gain in the UK? Blimey, you're hopeful )

[Guest mark&rachel]

hi all

 

Thought i would tag onto this thread. Can anyone help us?

 

We came to Oz 2 years ago. Our property was then valued at 225k. We took a 65k hit on it from that value. does anyone know if we are liable for CGT?

If not does anyone know any advisors that could help?

 

We are still renting in Oz too.

 

Hate the thought of having to pay them even more money and leave us even less for here!!!

[Andrew from Vista Financial]

hi all

 

Thought i would tag onto this thread. Can anyone help us?

 

We came to Oz 2 years ago. Our property was then valued at 225k. We took a 65k hit on it from that value. does anyone know if we are liable for CGT?

If not does anyone know any advisors that could help?

 

We are still renting in Oz too.

 

Hate the thought of having to pay them even more money and leave us even less for here!!!

 

 

Hi Mark & Rachel

 

Can you expand on this a bit more please.

 

Are you saying that you have now sold your house and the reference you make to taking a hit of 65k means it sold for 160k??

 

Regards

 

Andy

[Guest AlisonCarlton]

Hi,

 

Just looking into some finanacial advice on this one myself. A friend of mine who has been in oz for about 10 years gave me the name of a firm she used when moving over there to give her advice on all financial matters. The firm is called Montfort International and the website is www.milpc.co.uk/ My husband had a chat with them yesterday and they gave the impression that you would be liable for Capital Gains Tax. We will be having a meeting with them soon, so will update you then. I assume there must be similar companies in oz that can give advice on this matter too.

 

Alison

[Elliot]

Alison Carlton,

 

We have engaged Montfort (they are quite expensive and after 5 months we are still waiting for them to give us our financial strategy for leaving the UK, so not that impressed as of yet). They also gave the impression that we would be liable for CGT on the sale of our house but they have yet to confirm. will keep any updates posted.

 

Elliot

[Guest AlisonCarlton]

Alison Carlton,

 

We have engaged Montfort (they are quite expensive and after 5 months we are still waiting for them to give us our financial strategy for leaving the UK, so not that impressed as of yet). They also gave the impression that we would be liable for CGT on the sale of our house but they have yet to confirm. will keep any updates posted.

 

Elliot

 

Elliot,

 

Thanks for the info. My friend did say they were quite expensive but saved them money in the long run. When are you planning to arrive in oz? I have my flight booked for the end of June and husband and kids about to book flights for August.

 

Alison