Capital Gains Tax

rachpach1

need some advice on capital gains tax. My hubby & I are already home owners and we have recently taken out a further buy to let mortgage on a property which we paid £85K for. It has had around £10,000 spent on it and is now worth approx £120K. If we decide to sell the BTL mortgage has no penalty fees for early surrender which is good but where do we stand on capital gains tax and how much would we pay if we sold rather than let. Is there any way around it? Can anyone help please.

ginger_nuts

you and hubby are both allowed £8800 tax free on the sale off the property .
How long have you owned it ?
If you live in it for you while you can be avoid CGT for three years ,I don't no the implications for GCT on your original house if you do that .
Best to speak to an accountant

rachpach1

thanks for advice - we have only owned second property for about 3 months and it is nearly ready for sale. How long would we have to live there to avoid capital gains tax?

debjam

You need to live there for at least 6 months I think to be able to use the three year rule, but I would have thought that you should have little CGT to pay. 125k - 85k - 10k = 30k profit then deduct the allowance £8800 each, (but you can only claim two lots if you are both listed as owning the property). Don't forget you can also claim estate agent fees for selling and solicitors fees for buying and selling, unless you have included some of these in the 10k, the balance is what you pay tax on.

If you let the property out you would have to pay tax on the profit you make from the rent less interest payments only on the mortgage, lending agents fees (if you use one) and any other expenses incurred in the upkeep of the property.

That is my understanding of it all anyway, we are just selling our buy to let so I have been looking into CGT quite a lot recently.

rachpach1

thanks very much for the advice - i tried to read into it more but it got too confusing!! good luck with your property sale.