Capital Gains Tax?

Hello all,

I would imagine there are a few people in the same boat but couldn't find anything using the search function. The problem is this:

I am married and live in quarters but we bought a flat last year, which we rent out. I am planning to leave the Army in 2012 (not 12 minutes past eight unfortuneately) and I will receive a lump sum and I will opt for max commutation and put it all down on the flats mortgage. We will probably not live in the flat when I leave but go for a bigger house.

The flat is on an interest only mortgage and we try and put in savings wherever possible to lower the capital with the intention (pie in the sky?) of having the bulk of it paid for by 2012.

I will then obviously require a home to live in when I leave and this is my question; Will I have to pay Capital Gains Tax on the flat when we sell it if there is a gap before buying our new home.

I guess timing is key and I am not sure what I will do when I leave and where I will be living but I don't want any hidden surprises when I aim to sell the rental flat.

If anybody can point me in the right direction or let me know a prudent way of selling rental flat/buying new house without incurring any surprises then I would be very grateful. Thanks


As long as you only own one property, sell flat before buying the new home and the money from the sale of the flat goes towards the new home then you do not have to pay capital gains tax, regardless of delay between selling the first property and buying the second.

However have you been paying tax on the earning on the rent of the flat?
If you haven’t you can be eligible for capital gains tax at 40% for the whole period that you have rented the property out and to be paid immediately.
Always submit your renal earning via self assessment. It’s easy to show on paper that your profit on the rental property is tiny, you claim for interest on mortgage, maintenance, loss due to fair wear and tear (10% per year) and travel to and from property.
But for god’s sake declare it, if you get caught you will get shafted.
Jack, to avoid CGT at some point you will have to declare the flat as your sole owned residence and you "should" have lived in it, even if only for a short time. The HMRC advisors are pretty good about this kind of thing especially with ex-serviceman, give them a call.
If it's your 'primary residence' (so you don't have another house in your name somewhere in UK), then you're safe from CGT.

That said I'd be more worried about the price dropping between now and 2012, given the state of the market, than tax on any profit. Anyway, good luck!

JackOsbourne said:
Will I have to pay Capital Gains Tax on the flat when we sell it if there is a gap before buying our new home.
If this is your only owned residence and you have told HMRC about it and paid/filed accounts for the rental of the flat, then no you won't pay CGT on it. If you go and buy another property you will need to opt which one is your principal private residence, (PPR), and tell HMRC about it. The rules are quite generous about CGT on your PPR and most are shown on this leaflet, IR283 Leaflet.

I suggest to my clients with rented properties that they get a Tax accountant to ensure that they do all of the notification on time and file correctly. Not only are they normally good at it, but also their chargeout rates are lower than mine!

Talk to your tax accountant before buying an additional property, as if there is less than three years between the purchase and sale of the new and old properties opting to keep the old property as the PPR may be more advantageous.
Thank you all for your replies; I appreciate your time taken to answer my questions.

We do self assess so are being completely honest and open and we do not have plans to increase the property empire any time soon.

I appreciate that property prices may slump between now and 2012 but we reckon it is better to hang on in there and whittle away at the mortgage between now and demob day.

Good advice about giving the HMRC advisors a call and I will endeavour to do that.

Thanks again


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