Can I sell two houses in one tax year?

Angelina-M

Hi everyone.

I have two properties that I have been renting out, however due to a bereavement I havent the heart to carry on renting and I just want to sell up.

Both properties are empty as I havent advertised for tenants.

Together they are only worth approx 110k. My question is, if I sell them both in the same tax year will I pay out a fortune in taxes? I know I have around £8000 grace for myself and partner who owns half of the properties.

Im not sure what to do. I dont want to get them managed as I cant deal with any problems and also the rent in the area isnt high enough to justify it.

Thanks for any help guys

debbie42

Sorry to hear of your loss.

You may be liable for capital gains, depending upon whether (and how much) the properties have increased in value, if they can't be considered as your main property.

I would have thought the question would be better answered on a property investing forum? I'm not sure if there's any on MSE, but know of some others if you pm me.

This might help give an overview:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4016337

ashcarrot

Not sure what the capital allowance is when it comes to married couples ie could your husband sell one and you sell the other then you'd pay a percentage of

Property value now - (cost at purchase + 8000)

I believe not sure if theres taper relief or whether thats just inheritance, someone else will be able to answer that. I'd be done with it and sell up now whilst the markets high.

debbie42

If it's only 8K gain, as long as they haven't made any other gains in the year then I don't think it would be liable for tax as the allowance is £9200 for this tax year.

Angelina-M

Many thanks for the quick replies.

Also thank you for the kind thoughts on my loss.

I think I have not explained myself properly. I mean I have a £8000 tax relief amount or something before I start paying tax. Tax relief but im not sure of the name.

I bought the properties between 1997 and 1999. I bought them for approx £17000 each and have rented them out since. I owe probably £10000 on each property.

I just want to sell them and pay the lump sum off my own rather large mortgage as I think doing this will be the best bet in my case

Thanks guys

debbie42

Angelina-M wrote: »

I think I have not explained myself properly. I mean I have a £8000 tax relief amount or something before I start paying tax. Tax relief but im not sure of the name.

There's so many different taxes
You'll have a tax code for income tax, if you're an earner, is that what you mean? Capital gains has different allowances to income tax, though the amount to pay is dependent on your tax bracket.

If it looks like between you and your partner that you may be making more than 18K of profit on the two houses then it might be worth seeing an accountant or someone who specialises in such matters.

Ian_W

What you owe on them isn't relevant - CGT is payable on the profit you make between the buying price you paid and what you sell them for less any buying/selling costs like legal fees, EAs fees etc and any capital work you've had done on them - improvements rather than repairs.

So allowing for some buying & selling costs if each cost £20K and you sell them both for £110K you've made a taxable gain of £70K. Each will have taper relief you can deduct, indeed the '97 purchase may have a bonus year and a little indexation you can also count but in round figures that should reduce the overall gain by about 25/30% to around £50K. From that you can deduct your annual CGT allowance [times 2 as jointly owned] reducing the amount you pay tax on to around £30 grand split between you. You'd then pay tax at your normal rate unless when added to your earnings it takes you to HR when you'd pay some at 22 and some at 40%.

I know what you said about your bereavement but it would be very beneficial financially to split the sales over 2 tax years. Also if either has ever been your home, or your partners, then again that would reduce, maybe eliminate tax altogether. HTH but I would suggest you see an accountant - I'm not one but that's what I'd do.

Angelina-M

Many thanks again guys.

Ian that seems great about the taper thing. From your calculations it wont be so bad. I am a non taxpayer at the moment as my only income (besides the rental income which was hardly anything as the houses have been empty) was carers allowance for looking after my daughter, however thats stopped now of course.

I'm waiting for my accountant to ring me back. I dont like to ask him things as he didnt really know anything about taper relief :rolleyes:

debbie42

Angelina-M wrote: »

I'm waiting for my accountant to ring me back. I dont like to ask him things as he didnt really know anything about taper relief :rolleyes:

That would worry me a little!

Ian_W

If I remember correctly - you can't use any of the income tax nil band [as you get a distinct annual nil band CGT allowance] for capital gains but you can use all the 10 & 22% bands - so that's better than 40% at least!

I dont like to ask him things as he didnt really know anything about taper relief

Surprised about that as I would have thought CGT is bread & butter stuff - though mine did admit that the computer reminded him there is a bonus year for pre-98 owned properties when we sold one. Do ask questions and talk it through as you're paying him to minimise your tax liability and before you sell is often the best time to do that.

BoL.

Angelina-M

Right, spoke to my accountant and its really a no go for selling both in one year.

The money I make will put me into a higher tax bracket, plus if I hold onto the older one until next year, I will have full taper relief on it.

I'll just rent it out for a while and fingers crossed it will be a bit easier this time.

Many thanks for the replies guys, its appreciated.