what happens if

savinglikemad

I have a couple of properties I rent out, If I sell one, will I have to pay capital gains tax on the proceeds if I use them to pay of a mortgage on another buy to let mortgage I have. Just trying to find the most tax efficeint to sell a buy to let. Any suggestions welcomed

Debt_Free_Chick

savinglikemad wrote:

I have a couple of properties I rent out, If I sell one, will I have to pay capital gains tax on the proceeds if I use them to pay of a mortgage on another buy to let mortgage I have. Just trying to find the most tax efficeint to sell a buy to let. Any suggestions welcomed

Possibly - it really depends on the purchase price, selling price, any costs that can be deducted and any reliefs. The fact that you might then use the proceeds to pay off a loan on another property is irrelevant - it doesn't matter what you use the money for, it's the taxable gain that attracts CGT.

savinglikemad

I think the gain will be about forty five thousand house will sell for about hundred and ten, balance covers costs of buying renovating etc brought about five years ago.

scrummy_mummy_2

I'm not sure about this, but I do remember my accountant muttering something (wasn't really listening actually!) about living in a property that has been rented out for a period of 6 months as your prime residence before selling it means you can avoid CGT?????
I might have been hearing nonsense or just be clutching at straws...
Might be worth asking one of the bods on the investment boards...or try the motley fool website.

savinglikemad

know what you mean, things that really matter go straight over my head on the hand ask me whats on TV............. Will post same question on Tax board guess should have thought about that first see what I mean.

pootle666

You will have to pay tax on the profit - sales proceeds, less original cost, less cost of renovations (not just running costs, but capital work, such as moving walls, new bathroom, that sort of thing - probably anything that you haven't claimed against the rental income, you can't have relief for the same expense twice), less costs of selling i.e. solicitors, estate agent.

You can then have certain reliefs for the length of time you've owned the property, but it would be too long-winded to explain here, it depends on how long you've owned it,. when you bought it & other factors as rules keep changing. Also if you have ever lived in that property would make a difference. You would actually have to live in it, as your main residence, you can't just pretend for the sake of the tax, so this is probably not relevant.

You then get your annual allowance, which is about £9,000 (and you would get husbands as well, if property were jointly owned) and pay tax on what is left. It is irrelevant what you do with the proceeds, you pay the same tax.

Also bear in mind that if you pay off another buy-to-let mortgage you would not then get the interest allowed against that income, so you income tax bill would probably go up. It might be worth paying off personal debt (if you have any) first, even if the interest rate is a bit less, although you'd need to actually look at the figures.

savinglikemad

was thinking about living in it, but several other posts on that conflict on time and rewards, what are you aware of advantages of living in it, compared with not, (and I do mean living in it) as aware not lived in properties tend to get vandalised anyway so could end up with more repairs bills!

pootle666

I think it's probably worth your finding out exactly how much tax you would be liable for, before you make a decision like moving house. It may not be as much as you fear. Dig out the completion statement when you bought it & any money you've spent on it over the years. If you post details you could get an estimate - if you would be comfortable with that. Alternatively you could have a meeting with an accountant - they'll usually do a freebie first time - and get a rough estimate before you go any further.

clutton_2

you really need to talk to an acccountant to get proper advice - why would you risk thousands of pounds by only listening to well-intentioned posters (me included i hasten to say !!) https://www.singingpig.co.uk has an accountant poster called james smith whose advice is excellent.

savinglikemad

thanks will try the link, and see how I get on