Capital Gains Tax on BTL property

thriftyamy

so if you've never lived in the property, you get taxed on any profit you made?

the property only really ever breaks even at the moment on rent after paying the mortgage and agency fees

my question is deductions... I know you can take of any buying and selling fees before your pre-tax figure

can you deduct outgoings (mortgage and agency fees) for months when the property was vacant?

TCB1

I am studying tax at the moment so will do my best for you.

Mortgage interest etc is only deductable from your income tax not CGT.

Costs of buying and selling are deductable from CGT as are any value adding improvments for example extensions.

HTH

00ec25

CGT is a tax on capital and you will have to pay it as you say on your gain

try not to think of profit, think of gain in value as you seem to be confusing capital and income (ie revenue) taxes

mortgage and agency fees are a revenue cost of your property letting business and any incurred during void periods can be claimed against income tax (IT) on your annual SA tax return.
If you end up with a loss this can be carried forward to next year, note you cannot claim it against either any other income you may have eg from employment, nor can you claim it against CGT on the property

so as TCB says no you cannot claim those against a capital tax,

likewise you claim the cost of repairs (simplistically: replacing something already there) against IT and the cost of improvements (fitting something which was not there before) against CGT

thriftyamy

I've misunderstood the whole thing then as I though CGT was payable on anything over your personal (income) tax threshold annually?

what is the threshold about then?

bmunky7

There are different thresholds for different taxes, income tax personal allowance is around £6,500 currently but the Capital Gains Tax allowance is around £10k any gain below this £10k would not be taxable assuming it is the only CGT made in the tax year.

00ec25

blimey you have misunderstood it

you are doing an annual income tax return right??????

For income tax you declare the rent received and deduct any costs of operating the business: repairs, mortgage, agency, That gives your total annual rental profit which you declare on income tax. The only allowance for income tax is whatever your personal tax code is - assuming you have a job you should already know this as its on your payslip

For CGT the annual allowance is an amount which you can deduct from the net gain you have made when you sell the property. CGT only applies when you sell. Income Tax applies every year

there are many example calculations showing this, here's one I did yesterday http://forums.moneysavingexpert.com/showpost.html?p=27183497&postcount=3

thriftyamy

ok I should probably explain it's my other half's, but he's useless and probably wouldn't think about it til the tax man came knockin'!

I'm sure he deals with the income tax bit - it's me that got confused

he's not made more than 10k on the price he paid, so it's exempt?

kinglewis

Yep if he didnt make more than £10100 this tax year.

thriftyamy

ah few! he might squeeze 10K net profit if he's lucky but with the fees etc he wont make anything like that (I never thought I'd be so please to hear that!)

thanks everyone!

theartfullodger

There are at least 9 taxes a Landlord may be liable for.. (Prize of 10p for anyone sending me a postcard with at least those 9 taxes is on offer..)

make sure you are not minimizing one tax (eg CGT) at the expense of greater taxation on another (eg Income tax)

Cheers!

Lodger