How much tax would i pay on a buy to let??

SAZZLEEVANS

Hi

I hope someone can help. I bought a flat two years ago and have been renting it out. I pay income tax etc. I now want to sell it. Can anyone tell me how much tax i would have to pay on it. I bought if for £89,950 and aim to sell it for £103,000.

Thank you!!!!
Sarah

silvercar

selling price - buying price less costs.

you can include legal costs and buying and selling costs eg estate agents fees.

you also have a capital gains tax allowance of 8,800 for the current year.

£13,000 profit less say £2,000 legal costs and maybe £2,000 estate agents fees?

£9,000 profit almost all swallowed up by your allowance, so very little to worry about.

Gorgeous_George

If you are married, put the house in two names and there's two lots of CGT allowance. Calculator available here.

Also, ISTR that any improvements such as GCH, double glazing etc can be offset against CGT.



GG

SAZZLEEVANS

Hi

Thanks for that advice. I have rented it out part of the year even and have done so for the last 2 years also. The mortgage isnt a buy to let as i did buy it as was going to leave it empty but decided against it and have never changed it over. I know thats wrong but i have declared the income with the inland rev.

Is the allowance just for the sale of a property??

Thanks ever so much.

Sarah

PS I know its a little naughty but as i havent got another property i was going to put all the bills until sale in my name etc and say i have been living there for 6 month. I am going to leave it empty and was wondering if that would help but i suppose if the allowance is going to be the same as my profit i wont need to bother??

SAZZLEEVANS

Hi

Thanks for that advice. I have rented it out part of the year even and have done so for the last 2 years also. The mortgage isnt a buy to let as i did buy it as was going to leave it empty but decided against it and have never changed it over. I know thats wrong but i have declared the income with the inland rev.

Is the allowance just for the sale of a property??

Thanks ever so much.

Sarah

PS I know its a little naughty but as i havent got another property i was going to put all the bills until sale in my name etc and say i have been living there for 6 month. I am going to leave it empty and was wondering if that would help but i suppose if the allowance is going to be the same as my profit i wont need to bother??

SAZZLEEVANS

Hi

Thanks for that advice. I have rented it out part of the year even and have done so for the last 2 years also. The mortgage isnt a buy to let as i did buy it as was going to leave it empty but decided against it and have never changed it over. I know thats wrong but i have declared the income with the inland rev.

Is the allowance just for the sale of a property??

Thanks ever so much.

Sarah

PS I know its a little naughty but as i havent got another property i was going to put all the bills until sale in my name etc and say i have been living there for 6 month. I am going to leave it empty and was wondering if that would help but i suppose if the allowance is going to be the same as my profit i wont need to bother??

Gorgeous_George

I trust that you only paid income tax on the profits (having allowed for mortgage interest, wear and tear allowance and other allowances).

The CGT allowance is a yearly allowance. Check out the IR website for more info.

I might be tempted to do the same as you and you would probably be acting 100% within the rules. You could find that even by declaring the profit, your CGT libility is negligible. Would you be worried that the taxman could catch up with you later?



GG

Debt_Free_Chick

SAZZLEEVANS wrote:

Thanks for that advice. I have rented it out part of the year even and have done so for the last 2 years also.

Potentially, there are two cases of tax to pay on a BTL.

Firstly, there is (possibly) income tax to pay on the rent you receive. However, you can deduct certain costs from this. You should have been running the BTL as a business and preparing annual accounts, to show whether you made a profit or a loss. You would have made a profit if the rent you received, less the allowable expenses, produced a "positive". This figure should then have been put on your tax return as income, on which you would pay income tax. If the accounts showed that you made a loss, then you can carry that forwards and offset it against any profit you make in the next year.

In addition, the property is an investment. As such, it is assessable to Capital Gains Tax, as silvercar has explained.

HTH

Debt_Free_Chick

Gorgeous_George wrote:

I trust that you only paid income tax on the profits (having allowed for mortgage interest, wear and tear allowance and other allowances)....

Was typing as you posted

SAZZLEEVANS

Hi

Thanks. I have paid tax and declared the very small profit i made. Income minus the interest payments etc. The amount i am concerned about is the small amount of profit i make on the sale. Sorry to be thick but am i allowed £8,800 profit of the sale of the property which is the asset?

Thank you again.

SARAH

silvercar

yes, presuming you have not made any other capital gain in the tax year, you won't have to pay any tax on the first £8,800 of profit.

The remaining amount of profit (after deducting the expenses) would be taxed at your marginal rate of tax. This would all be included in your annual tax return. The tax becoming payable, under current rules, by 31 January in the year following the end of the tax year. I sell before April this year, include it on your 2006/07 tax return and pay the tax by 31/1/08.