CGT a rather unusual situation - Help needed!

stressed_eric_2

When I was young and living with my folks, while most of my friends were blowing their disposable income I was paying a mortgage on a little property. I have never really had a pension plan but had been paying into this place. 30 years later, I needed to sell it to re-invest it into another place nearer to where I now live with my wife & kids. The 500 mile around trip was getting to much!!

Most of the sale money went straight into the new property. The remainder I needed to pay back several personal loans made to me by various friends and family (interest free) which I needed to keep hold of the 1st property during difficult times. The rest I am using to renovate the new place as it needed totally gutting and modernising.

The plan is to long-term let the new place (run it as a business) to give me some kind of financial support when I retire in 10yrs or so.

The problem I think I have is that on the face of it I have a massive income from selling the old place (£190k) but in reality its all back in bricks & mortar. If this was any other kind of pension fund, I could have switched from one place to another without getting hit so badly, but as far as I can see, I could be liable to £40-£50k CGT in Jan if I cant find a way through this.

This will mean having to get a mortgage again to cover the tax bill is there any other way?

Thank you so much for anyone who knows and can help as it is really starting to affect my health worrying about it.

pjclar02

Hello there

On the assumption that you have never lived in the property, then unfortunately the sale of that property is going to be fully liable to capital gains tax.

If you have a £190k gain, then yes, you could be looking at a liability in the region you mention below of around £50k. If you lived in the property at any stage, this could be reduced down. Otherwise, there are no creative ideas I can offer as to how to avoid this liability I'm afraid.

Sorry!

zygurat789

I don't think this is an unusual situation, you just seem to have overstretched yourself a little.
You estimate your liability to be £44k - £50K, this is a wide range and you should clarify any liability first.
How much did you actually pay out for the property?
How much did you actually receive for the sale?
In which tax year was it sold?

You say you you needed money during the period of ownership, was any of this spent on the property and not claimed against the rental income?
Did you make your wife a joint owner before you sold the property?

xylophone

http://www.hmrc.gov.uk/cgt/property/basics.htm

sunshinetours

Did you declare income on the rental for the past 30 years?
As others have said - if you have lived in the place lettings relief may be applicable

On the face of it you certainly do have a large CGT bill to pay yes - see an accountant wold be my recommendation ASAP to minimise your worry and potentially some of the tax bill

And yes you have highlighted some of the attractive features around penisons (ignoring tax relief on payments) although you wouldn't be able to access your money until later on life or live in it!