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    • Iainhignell
    • By Iainhignell 12th Jul 17, 12:48 PM
    • 5Posts
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    Iainhignell
    Outstanding Mortgage and Capital Gains Tax - Can it be deducted?
    • #1
    • 12th Jul 17, 12:48 PM
    Outstanding Mortgage and Capital Gains Tax - Can it be deducted? 12th Jul 17 at 12:48 PM
    If a buy to let property still has an outstanding mortgage on it when it is sold does the amount outstanding get deducted in the CGT calculation? If so, can someone explain how?

    Thanks,
Page 1
    • kingstreet
    • By kingstreet 12th Jul 17, 12:52 PM
    • 32,360 Posts
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    kingstreet
    • #2
    • 12th Jul 17, 12:52 PM
    • #2
    • 12th Jul 17, 12:52 PM
    No. It's the current value, minus the value at purchase or at the point the property was first let.

    If you once lived in the property, that period will be exempt so read up on this.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • G_M
    • By G_M 12th Jul 17, 12:52 PM
    • 42,255 Posts
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    G_M
    • #3
    • 12th Jul 17, 12:52 PM
    • #3
    • 12th Jul 17, 12:52 PM
    No. The mortgage is not an allowable expense for CGT purposes.
    • Iainhignell
    • By Iainhignell 12th Jul 17, 12:58 PM
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    Iainhignell
    • #4
    • 12th Jul 17, 12:58 PM
    • #4
    • 12th Jul 17, 12:58 PM
    So for GCT purposes there is no advantage to having a mortgage verses owning the property outright?
    • saajan_12
    • By saajan_12 12th Jul 17, 3:13 PM
    • 989 Posts
    • 669 Thanks
    saajan_12
    • #5
    • 12th Jul 17, 3:13 PM
    • #5
    • 12th Jul 17, 3:13 PM
    Assuming you would count the mortgage at the point of sale as well as the point of purchase, it would likely mean MORE CGT, not less! You would consider the increase in your equity i.e. increase in propverty value and any capital paid off. The maths is (ignoring any renovations / capital improvements and any remortgages for simplicity)

    Final equity received - Starting deposit
    = (Sale price - Final mtg balance) - (Bought price - Starting mtg balance)
    = (Sale price - Bought price) + (Starting mtg balance - final mtg balance)
    = Increase in house price + Capital paid off mtg.

    CGT is actually based on the increase in house price. Looking at mortgages, the increase in equity would be the same or more than the increase in house price, so do you really want to pay a percentage of this to the tax man?
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