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Two properties to sell.

Tom_Jones
Posts: 1,562 Forumite


I currently have two houses, one of which I rent out, and I now wish to sell the one that I rent. I understand that I maybe liable to pay Capital Gains Tax at 40 % if I sell this property.
Is there a legal way that I can avoid paying this tax ?. Is there a way I can reduce the percentage I pay ?
One of the houses was left in a will.
Any advice would be appreciated
Thanks
Is there a legal way that I can avoid paying this tax ?. Is there a way I can reduce the percentage I pay ?
One of the houses was left in a will.
Any advice would be appreciated
Thanks
0
Comments
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you will haveto pay CGT at 40% on the increase in the properties value since you obtained it, less your CGT allowance and CGT taper relief. One of the only ways to get around this is if you currently use it as your main residence. If not,there are other options, but I'll wait for more replies first.Anything I write is based on my opinion only. Before acting upon any advice from anyone on a forum further professional advice should be sought.0
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I BELEIVE YOU CAN LESSEN THE AMOUNT DUE IF YOU CAN 'find' BILLS PERTAINING TO THE REAPAIR, MODIFICATION AND UPKEEP (gardner, cleaner, window cleaner eTC) OF THE PROPERTY.
You can also, if you run the rental home as a business, somehow only pay Income Tax on the profit but I'm not sure of the rules and you'd need to speak to an accountant.
Hope this helps,
Riz"Unhappiness is not knowing what we want, and killing ourselves to get it."Post Count: 4,111 Thanked 3,111 Times in 1,111 Posts (Actual figures as they once were))Women and cats will do as they please, and men and dogs should relax and get used to the idea.0 -
garysletters wrote:you will haveto pay CGT at 40% on the increase in the properties value since you obtained it, less your CGT allowance and CGT taper relief. One of the only ways to get around this is if you currently use it as your main residence. If not,there are other options, but I'll wait for more replies first.
So Gary if I sold my main residence and moved into the rental property would this be a way around paying CGT at the time, and in the future ?
Thanks for the replies so far, I have a good accountant but need just a bit of general information on CGT before I talk to him, and to make sure I pay the least amount in tax.0 -
T_J,
Yes it would get round some of the Capital Gains Tax, but you would have to live there for a reasonable amount of time (say 6 months+) or to IR it will look suspect!
These articles may help you:
http://www.fool.co.uk/taxes/articles/cgt_property.htm
http://www.fool.co.uk/taxes/articles/cgt_minimise.htm0 -
Check this at the Inland Revenue Web Site.
The last three years of ownership are exempt if the house has at any time been your main residence.
There is a further exemption of up to £40,000 for periods when the house was let as "residential accommodation"
The gain is based on the purchase and sale prices, not on valuations. Assuming the house fetched £200K (net of costs of sale such as advertising and legal fees) and you sold it in July 2009, and that you bought it in July 1998, the computation would be:
Period of ownership = 11 years
Gain = £200K minus £46K = £154K
Exempt as main residence = 7 + 3 years =10 years
10/11 times £154K = £140K
Not exempt= 1/11 times £154K = £14K
Exemption for letting (assumes house let for whole period between July 05 to July 09)is the lesser of:
a. The gain that was exempt as main residence (£140K), and
b. £40K
So the £14K is covered by the letting exemption and there is no CGT to pay.
In the unlikely event that the £40K letting exemption did not cover all the non-exempt gain, you would then get a further reduction known as "taper relief", which would reduce the remaining gain by 40% (assuming you sold after the tenth anniversary of the day you bought the house)
Then, there are your annual exemptions from CGT (currently £8,200 each).0 -
There you go!!
Saved myself having to write it all down.
In order to claim it as your main residence, you should have all bills put in your name (including council tax/electoral role) for at least 6 months, preferably a year as doug says. You have to CLAIM it was your PPR.
also, if you lived in the house before you rented it, this helps, as stated previously.Anything I write is based on my opinion only. Before acting upon any advice from anyone on a forum further professional advice should be sought.0 -
This might be ridiculous or brilliant!
What Doug said about living there reminded me of something
I heard this week on the Jeremy Vine show, it might be able to be applied to this situation too.
Couples were pretending to split up, and one would rent a house in a school's catchment area just to get the kid in that school.
I am presuming your married here I know, but, apply for a divorce but do nothing about it, then pretend to move into the house, then, on paper at least, it will be a genuine reason to be your main residence, it might make it look more kosher so to speak.0 -
I have just looked at the site dougk posted, and as I am not as savvy as others with regards to tax, perhaps someone can help me?
My partner owns a small terraced property (since 1994) and owes around £20k on it. We both lived there up till 2001 then bought another property, which we currently live in, whilst renting the other house out. We have been told it's currently worth around £65-70k and it has been rented since 2001. Can anyone help in working out what the CGT would be if we sold?
Thanks in anticipation!0 -
Karenj, read my previous post0
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thaylock wrote:Check this at the Inland Revenue Web Site.
There is a further exemption of up to £40,000 for periods when the house was let as "residential accommodation"
Can you give a reference please? I can't find it on the ir website. I can find something under the rent a room scheme, but would that apply?No reliance should be placed on the above! Absolutely none, do you hear?0
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