Question:
My wife and I are looking to move to the USA (she's a US citizen) from the UK (I'm a Brit!). We own a house, our only property, in the UK which has a small mortgage. If we were to move to the States and rent a house over there, as well as renting out our own UK property would we have to pay CGT on the property when we come to sell it? During this time, we will not own property in the US or any other property in any country. If we do have to pay tax, should I get the house valued at the point we rent it out, thus assuming we only pay CGT on the difference between the value at renting and the sale date?Arthur Weller Replies:
Firstly UK capital gains tax (CGT) is based on the difference between the acquisition cost of the property and the sale proceeds. The value of the house when you start to rent it out is irrelevant.
Secondly, it is not so likely you will be liable to UK CGT when you sell the house:
a) It sounds like it is your ‘principal private residence’ (PPR), so there is no UK CGT if you sell now or within three years of moving out of the house.
b) Since you are going to rent out the house when you move, you will have the ‘letting exemption’ available to you to reduce the capital gain if you don't sell within three years of moving out.
c) If you sell in a year when you are non UK resident, there is no UK CGT to pay then. If you return to become UK resident again you will become liable for the UK CGT you avoided by being non UK resident. However, this only applies if you have not been non UK resident for 5 complete consecutive tax years before you return to the UK. But if you have been, this 'avoided UK CGT' will not 'rejuvenate' when you return.
Arthur Weller replies:
