buy then rent somewhere else

nomorekids

please can anyone help me. We have been trying on and off to sell our house for years and to our delight it is gone. Buyers want to move quite quickly due to local school being good. We want to stay for exactly the same reason for one of our little people but in exactly one year we need to be in new area for our older kid. So......

the idea is this....

we buy in new area and immediately rent it for a year.
we sell up here and move into rented locally.

I don't work and therefore dont pay tax but hubby does. We obviously pay tax on the rental income from the house we intend to own but could we offset the house we would have to rent to live in as expenses.

If these were to cancel each other out, we wouldn't pay tax at all? don't know about CGT either.

any help would really be appreciated.

thanks

silvercar

CGT: You get exemption for the last 3 years on any house you have lived in as your principal private residence. So your current house will creat no CGT liability. Your new house may depending how long you own it, but this can be diminshed by tapering relief and your personal CGT allowance of about £8,000. Also the liability will only occur when you sell the new house so your don't need to worry about it just yet.

Your new house will presumably have a mortgage. The mortgage interest can be set agains the rent as can legitimate expenses so the tax you pay on the rental will be reduced.

nomorekids

thanks, this interesting because we were going to buy the new house outright with our savings but it would be better then to get the highest mortgage we can?

has anyone done this?

nomorekids

thanks, this interesting because we were going to buy the new house outright with our savings but it would be better then to get the highest mortgage we can?

has anyone done this?

Doozergirl

You'd probably get a better return on you money if you were to put it into the highest paying savings account for a year. After all the expenses and stress that go with being a landlord, you can hardly find a buy-to-let that would pay better than the bank, nevermind a fmily home that would do the same.

I'm living in a house that we rented out for a while and while I was surprised at how well they had kept the house, they did pay the rent a few days late on a couple of occassions and we've since discovered that they hardly paid a bill. Having to phone a bailiff every couple of weeks isn't much fun.

I'd live relatively stress free until you get that acceptance letter from the school at around Easter, then take pleasure in buying a new home for yourselves which you can move into without the house feeling 'used'.

silvercar

nomorekids wrote:

thanks, this interesting because we were going to buy the new house outright with our savings but it would be better then to get the highest mortgage we can?

Do what's right for you, rather than becoming obsessed with the tax situation. Paying tax on a profit is better than not having a profit.

The mortgage doesn't have to be secured on the house being rented, provided it has been obtained in order to fund your letting "business".