Q. We bought our house 23 years ago and we expect in the next six months to move into a bungalow that my wife inherited, and rent out our current home. We bought the house in 2002 for £127,000 and it is worth about £360,000 — a gain of £233,000.
If we rent out the house for ten years then sell it would the liability for capital gains tax be based on the value when we first started letting the property, £360,000, or would it be calculated using the initial purchase price and then prorate the gain to the number of years it was let?
James, East Riding of Yorkshire
Nimesh Shah replies
Your situation is not uncommon and I have had to guide many of my clients through the tax complexities of simply moving between homes. What appears to be a straightforward decision has a number of tax repercussions.
