Questions re renting house out.

Wibble

Hello,

I sold my house a year ago and moved into my girlfriend's house. We recently got married and are now buying a new house.

We plan to keep my wife's house (which is in her name) and rent it out, but I have a few questions that I hoped you might be able to help with.


1) What happens regarding capital gains tax if, for instance, we rent out the house for 5 years or so and then sell the house? House prices in the last few years have gone up a lot and I don't expect they'll go up nearly as much in the next 5 years, so how do they work out how much the CGT is? If, for instance, the house had increased in value by 100k over the 5 years my wife's owned it and lived there but it then didn't increase in value at all during the next 5 years when we rent it out (unlikely I know, but I'm just trying to make a simpler example) would we have to pay CGT on half the gain as it'd be averaged out over the whole time it was owned?

2) I'll need about a £130k mortgage to buy the new house. Would it make sense to remortgage my wife's house and move the equity from her house to our new house? That would mean that the mortgage on the new house would be low (or none) and there would be a big mortgage on her current house. I've been told that this is good as then the interest payments can be a business expense.



Thanks in advance!

Mrs_pbradley936

Your only property/home is exempt from Capital Gains Tax. Any other property is not, another property any gain is taxed at 40%. There are allowances and tapers but that is it in a nutshell.

If you are married you can use each other's allowance i.e. if it is £8000 now then a married couple could have a gain of £16,000 before they have to pay. You also have to pay income tax on any rent. As for which house should be mortgaged I do not think it matters but someone else will be along soon who knows a lot more about it than I do. Try seaching the forum if nobody answers you soon because I have read about this topic before.

altyfc

With regards to 1), I understand that you would be taxed on any gain that your property makes during the time it is not your primary residence.

Aaron