Are we liable for capital gains tax on a house we lived in? | Money | guardian.co.uk

Are we liable for capital gains tax on a house we lived in? | Money | guardian.co.uk

Q After two years of trying to sell in a falling market, in December 2008 my wife and I finally managed to move house by releasing the equity in our home by remortgaging with a buy-to-let. Our plan was to rent it out for a two-year fixed period and then sell when the market was more buoyant.

If we now sell the rented property will we be liable to pay tax on the full price (approximately £200,000) or on the increase from when we bought it?

We raised £70,000 from the remortgage and have had an interest-only mortgage on a fixed rate for two years. The rental income just covers the mortgage and insurance.

It would seem unfair to pay tax on the whole amount as we had lived in the same house for 15 years. Is there a way of avoiding tax on the full amount?

A. ...