bobrho

Hi, we are planning to move to Wellington area in Aug 2017. We are considering what to do about our UK house.
We could rent it out, but we fear it may cost us dearly in capital gains tax when we do sell it in future.
If we sell, how do we time the sale to coincide with our leaving date so we don't have to move to temporary accommodation.
Any ideas or experiences appreciated.

Justcol

You can't time it, you can only try your best

List it at a realistic price. Be open to offers
and give yourself around 3 months to complete

MrsFychan

as stated there is no easy way of doing it. And you are right the rules on rental properties on non residents has changed so you will need to look at your tax implications in UK and NZ.
We had ours on the market 5mths before we moved, first sale fell through on exchange and complete day, serious was not happy as we had booked to come over and had booked the removals. Nothing we could do we came over, relisted the house and got a bit more money for it on exchange and completion 3mths later.

Munchkjn

We are in the same situation. If anyone has a link to information on the tax implications, that would be really handy. I don't know where to start!

I assumed I could rent my house and offset the rental income against the mortgage repayments. Thereby not needing to pay any CGT. But that may be a phallacy?

LittleGreyCat

As far as I know tax rules on renting out a UK property are different if you live in the UK or live abroad.

If you rent in the UK and live in the UK then you get a CGT relief for the time it is rented (up to £40,000 I think), and also you have a personal CGT allowance.

As far as I know if you leave the UK then you get no tax allowance in the UK of any kind, but are still liable to CGT.

We plan to rent out our home when we move to NZ to keep one foot on the housing ladder, and a bolt hole if it all goes horribly wrong. However if we decide that NZ is the place for us very long term then once we have our residency visa without travel restrictions (which will take 5 years) then the sensible thing would be to rent out our NZ home for a year, and come back to the UK as tax residents and then sell the house. This should reduce the CGT if the rules haven't changed!

We are, however, moving on a Parents Visa so we aren't tied to NZ by a job. The strategy we are considering probably won't work for people with NZ jobs.

I'll try and dig out the references I found when we first started looking.

It is all very confusing because at first glance, if you read the rules for Residential Property then ex-pats do seem to get a CGT allowance. However I think I found a reference saying that rental properties were treated differently.

MrsFychan

https://www.gov.uk/tax-uk-income-live-abroad/rent

jmh

The rules have changed since I let out my property in 2011. There was no CGT and I was allowed the tax free allowance even though I was not resident for tax purposes.

My reasons for renting were:
1. There was some doubt in my mind, so letting the property would be most cost effective if I returned.
2. Property prices in London had stagnated, but I was confident that they would go up, and they did. I estimate I made GBP 50K capital gain on top of having the mortgage paid 2X the monthly amount required.
3. The exchange rate was shocking so I thought if I delayed it might improve. It did improve a bit, and I probably benefited around $NZ 6K, but that's hard to predict.

Negatives:
1. Auckland property prices continued to rise and probably wiped out any gain from the London market. If buying outside of Auckland, this probably would not have happened.


Recommendations if renting:
1. Pack away all your stuff as if sending it to NZ and see if you can store it securely. I had a bit of damage and some items disappear. If you then decide to sell, it's all packed ready to go.
2. Make sure you get a good agent who will do regular inspections, source new tenants, resolve any urgent problems.
3. Get landlord's insurance. In the UK it's not that expensive. I would recommend insurance that covers people on benefit. Obviously you don't want beneficiaries as tenants, but mine became a beneficiary while pregnant and I didn't feel I could throw her out on the street. I had to change the insurance to cover it. I had a plumbing issue which cost GBP1000 and the insurance covered it so it really made a difference.

It probably boils down to:
1. How much you feel you need the back out option
2. Will your house go up in price enough to make paying the CGT worthwhile. The tax may not be as bad you think, and last time I looked you could deduct the cost of repairs/improvements - keep those receipts

nikkijane88

We had no option but to sell our for our personal situation. Thankfully it was a reasonably smooth process with receiving our offer 3 days after going on the market!

However, for us it's one less thing to worry about dealing with from overseas

Munchkjn

So I gather you only pay tax on any gains in capital value since the time you leave the country until the time you sell?

And the tax rate is 28%?

So if my property is worth £250k nominally now (hard to prove without a sale) and I sell it as an expat in 2 years time for £300k. I have to pay 28% of £50k in CGT ~ £14k?

But if the property sells for £250k 2 years later, then CGT is £0?

Please advise if that's an incorrect interpretation..

Munchkjn

Or is it the capital gain from selling price - buying price, even if you bought the property many years before you decided to emigrate.

So in my example above: I bought the property 5 years ago for £150k, left the UK when it was worth £250k and then sold it 2 years later for £300k.
Would I pay CGT on £50k (as above) or on the (300-150) £150k...?

LittleGreyCat

Talk to the Inland Revenue - they won't eat you.

Free advice on an Internet forum is worth about what you pay.

Munchkjn

If you don't know the answer, it's OK. Maybe someone else does.

And thanks for the IR advice, as a child I sometimes need telling.

LittleGreyCat

Please let us know what you find - the whole area is very confusing.

MrsFychan

here is how to work it out. not sure if it helps or hinders. magic date is 5th April 2015 - thats where they take the market value start from

https://www.gov.uk/guidance/capital-...e-gain-or-loss

jmh

Good grief, that looks complicated. I guess each person's situation will be different. I found the IRD easy to deal with so maybe worth calling them.