Buying a new house, keeping the old one as BTL

Jimbo333_2

Hey guys, a few questions, based on a scenario I'm considering:

1. If you upgrade to a bigger house, and choose to keep your existing house (yes, starting a new mortgage on the bigger house, putting down 10 or 20% deposit again, and making sure that you have at least 25% equity in the old house so that a BTL mortgage can be sourced)... does this mean that if you sell the old house prior to the 3 year CGT window ending, even in you make a significant gain on the old house of, say, £50k, you won't owe a penny in CGT ?

2. If so, I assume that rule only applies because the old house was your only home in the past? (i.e: not a BTL investment initially)

3. If you go beyond the 3 year window, and owe CGT on your gain, what values do they use to calc the gain? The initial price you paid for the "old house" when you bought it as your residence many years ago, or the valuation price that was obtained when you converted to BTL?

4. In the scenario above, what chance would you have of convincing your existing residential lender to give "consent to let" on the old house, while you swan off to the newer bigger house, with a new residential lender?

With thanks

Jimbo:beer:

cte1111

You are correct in that, if a house has been at some point your principal private residence, then the gain in the last 36 months of ownership are free from CGT. So if you sell the house within that period, then you will not make a chargeable gain.

If you let the property, then you will also be entitled to letting relief. Letting relief is the lower of:
1. The actual gain during the let period
2. The amount of private residence relief already claimed (i.e. the gain during the period that you lived in the house)
3. £40,000

http://www.hmrc.gov.uk/helpsheets/hs283.pdf for more info.

So to answer your questions:
1. yes
2. yes
3. the total gain is the sold price less the purchase price (and allowable costs). The chargeable gain is the total gain - PPR - letting relief. If you own the price jointly with a spouse, then you will also be able to use both of your CGT allowances, presuming you have no other chargeable gains in that year.
4. sorry no idea, not good at mortgage questions but sure other people will be able to help!

Yorkie1

Q4. Depends on your lender's policy to start with. Some are fine, some charge a lot, some don't do it as a matter of policy.

CLAPTON

1. yes if you sell within 3 years of moving out then there is no liability to cgt
2. yes it must have been your principal private residence (i.e. you owned it and lived there)
3. after three years you have a liability for cgt but it's unlikely there will be any tax to pay for a while because you have several allowances

the gain is based on the selling price minus the purchase price
however you have the following
a. the prorataed time you lived there is exempt (PPR) plus the last three years
b. you have letting relief; the lesser of the PPR relief or the period of the let or 40,000
c. you have a cgt allowance of 10,600
d. ask them

domcastro

Why don't you take out the mortgage with the old lender? I'm currently going through the same but decided I was more likely to get the Consent to Let if I took out the new mortgage with them (however, I was borrowing against the first house to buy the second). I'm still waiting for the mortgage / further borrowing offers but seemingly the computer said Yes (according to the bank manager). The consent to lease has now been granted though.

abankerbutnotafatcat

If OP was outside of the 36 month window but moved back to the property and lived there again for six months or more would he still be liable for CGT?

Jimbo333_2

Thanks all, very good to know that things are as I hoped!

I will definitely be asking the mortgage co for consent to let, I was just really surprised that it could be an option, seeing as we'd be buying another house.

Domcastro, I may ask the existing mortgage co for a quote for a new mortgage, but I feel that they won't be competitive. On top of that, I'm self employed, and as they're a High Street bank, they're a bit backwards at understanding how my business works, and therefore they may not lend what we need this time round (didn't ask them for much last time, so it wasn't a problem). But you're right, with the potential for landing two new mortgages, versus losing one, they may play ball. I'll get on the phone to them.

Jimbo333_2

abankerbutnotafatcat wrote: »

If OP was outside of the 36 month window but moved back to the property and lived there again for six months or more would he still be liable for CGT?

A good question... but I think that borders on "flipping", which isn't what I was trying to do!:A

Jimbo333_2

abankerbutnotafatcat wrote: »

If OP was outside of the 36 month window but moved back to the property and lived there again for six months or more would he still be liable for CGT?

A good question... but I think that borders on "flipping", which isn't what I was trying to do!:A

silvercar

abankerbutnotafatcat wrote: »

If OP was outside of the 36 month window but moved back to the property and lived there again for six months or more would he still be liable for CGT?

Living in the property as your main residence, exempts you for the time it was your main home and the last 36 months of ownership. If there is any period that doesn't qualify as either main home or last 36 months, then your CGT liability is based in that time as a proportion of the total time owned.

There are other reliefs to reduce the bil like Letting relief and your CGT allowance.