Help: How can we mitigate CGT on 2nd Property Sale?

Streaky68

I'll need to check with the wife (probably over the weekend) re Income Tax liability on the rental.

However, from what I recall, the rental income, taking into consideration the letting agency fees, mortgage payments, other expenses incurred plus short spells where the property was between tenants, resulted in costs being covered rather than any "profit".

Would this impact the CGT payable?

Really appreciate all the help being provided here. Thanks again!

Streaky68

jamesd

It'll have no effect on CGT, just on income tax. CGT is only affected by purchase and sale costs plus property improvements. Maintaining the property and letting agent costs and such are deductible from income for income tax purposes but can't reduce the income below zero to reduce tax due on other income.

CLAPTON

Streaky68 wrote: »

I'll need to check with the wife (probably over the weekend) re Income Tax liability on the rental.

However, from what I recall, the rental income, taking into consideration the letting agency fees, mortgage payments, other expenses incurred plus short spells where the property was between tenants, resulted in costs being covered rather than any "profit".

Would this impact the CGT payable?

Really appreciate all the help being provided here. Thanks again!

Streaky68

There is no relation between the tax on rental income and cgt.

However, whether she made a profit or not, she is obliged to fill in tax return.
Presumably you know that only the interest on the mortgage is deductable and not the capital repayment element.

Streaky68

Hi, I'm certain that it was an interest only mortgage that she had.........However, I'm less certain that she will have been submitting tax returns over the period of the rental.

I assume we should now do so!

jamesd

Well, first she should go back for each tax year and calculate the taxable income of rent less allowable costs. That'll tell her how much tax is due. Then if the income each year is within the no tax return limits she wouldn't need to submit a tax return unless she already had to for some other reason. She could send a letter to HMRC with details of the untaxed income for each year and a cheque for the total amount of tax owed.

For a contact like that with no sign of a HMRC investigation they are likely to do no more than also ask for interest on the unpaid tax and maybe 10-30% in penalty for the years that are late.

I'm assuming from the value of the property and the presence of a mortgage that the amounts involved are fairly low, with total tax due likely to be in the £2,000 or less sort of range.