If I rent out my house then sell it in 2026, what will the capital gains tax be?
Q I am looking to move out of my main residential property to a new property, then rent out my current house. I bought the house nine years ago and the value has increased from £210,000 to £360,000.
My question, is what would I pay in terms of capital gains tax (in, say, five years) if I were to sell then? Assuming the value in five years is £400,000, would the calculation be based on the value when it stopped being a residential property (so £360,000) or my initial purchase price (which hardly seems fair!)?
MD
A You may not think it fair but, yes, you do work out the gain by subtracting the original purchase price from the amount you managed to sell the house for. You also subtract the costs of buying and selling. But that’s not the end of the story. To work out the chargeable gain – ie how much you’ll have to pay capital gains tax (CGT) on – you need to work out how much private residence relief you are entitled to, which you get because the house was your home for at least part of the time you owned it. According to government advice, you get full relief for the time you actually lived in the home, plus the last nine months you owned it even if you weren’t living there.
So if you did sell in five years’ time – after 14 years of ownership – you would get relief for nine years and nine months. And that would mean that only 30% of the gain is chargeable to CGT, according to the government’s handy CGT calculator. Even better is the fact that if you have made no other gains in the tax year in which you sell, you can make full use of your annual CGT allowance, which – in the current tax year – makes £12,300 of your total chargeable gains tax free. If the property was jointly owned, the CGT bill is calculated on your share of the gain and you each get your own CGT allowance.
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