Thinking of buying a house

Ader1

I'm considering buying a house a distance from where I presently live. I've recently returned home after working abroad for a while. I have a property which has been rented out and is mortgage free. Anyway, I'm thinking of buying a property in a 'near-by' town because thee are many more job opportunities there. I'm not sure of the tax implications of buying a second property and then in the future I decide to sell the property I first owned. Can anybody help me here or tell me where should I go for the information. Also, I would like to know if you people on here think I should go for the government scheme which lends 50k for house buyers? I don't think it's just for first time buyers or new builds. Have they provided all the details yet. The last I heard is that it would be possible for wealthy foreigners to make use of this scheme so I thought I would be all right. I do have a deposit saved for the new purchase but I was thinking of withdrawing some equity from the other house which I could off-set against future tax liabilities. Any thoughts and or advice warmly welcomed.

Ader1

Wow! This forum is incredibly busy! I'll bump this in the hope I get a response. :-)

Slinky

I doubt the Government want to lend you £50K to buy a second house.

Ader1

Are you sure? But what of my other question(s)?

Ader1

Slinky wrote: »

I doubt the Government want to lend you £50K to buy a second house.

http://www.moneyweek.com/personal-finance/mortgages/help-to-buy-should-you-take-the-offer-63324

The second part of the scheme is a mortgage guarantee, which from January will cover purchases of all property types up to the value of £600,000. The idea is that homebuyers with at least a 5% deposit will be more easily able to secure a loan from participating lenders because the government will guarantee a chunk (up to 15%) of the mortgage. The state will then be liable for some of the losses if the borrower defaults.

There's the answer. But it's only up to 15% of the properties value.

How about tax liabilities when selling a property?

00ec25

Since you say you are returning from a period overseas I assume you have been correctly registered under the non resident landlords scheme for income tax purpose on your existing rental income? On that basis you are probably already liable for CGT when you sell that property so going on to own another one will not change that status.

To give a more accurate answer you will need to explain the circumstances of your existing property and your period abroad.

- Prior to leaving the UK did you live in the property as your only home for the entire time you were its owner? If yes then that period is exempt for CGT

- What was the reason for going abroad, did your company send you there or did you chose to go yourself? This could impact on the CGT period of absence rules (although it’s a bit tenuous in your case)

- How much is the gain if you sold it tomorrow, ie original purchase price – expected selling price? Will CGT actually be a problem? If yes then we are into various CGT reliefs such as letting relief and personal allowance, but until we have a figure there is no pint going into such detail

Ader1

00ec25 wrote: »

- How much is the gain if you sold it tomorrow, ie original purchase price – expected selling price? Will CGT actually be a problem? If yes then we are into various CGT reliefs such as letting relief and personal allowance, but until we have a figure there is no pint going into such detail

Thanks for the reply. Could I ask you this one question first of all? What do you mean by 'Will CGT, be a problem? Property is quite cheap around here but I would imagine that it's increased by around £100k in around 10 years.

Ader1

I think the property would now be valued at around £180K. Is there a threshhold for when CGT kicks in? I know there is in when property is left for somebody in a will.

00ec25

Ader1 wrote: »

Thanks for the reply. Could I ask you this one question first of all? What do you mean by 'Will CGT, be a problem? Property is quite cheap around here but I would imagine that it's increased by around £100k in around 10 years.

bad wording by me... not a problem.... an issue

Yes there is a CGT threshold, if the gain is less than the personal allowance (currently 10,600 for 12/13) then CGT is not an issue so there is no point discussing it

however, as you have indicated the gain is 100K, then you most certainly do need to consider CGT as it is an "issue" since you may need to pay some depending on your other answers...ie more info is needed from you before we can guide you through the available reliefs:

- when did you buy the property : month & year
- what was the original cost: 80K???
- did you live there as your only home from date of purchase
- when did you move out: month & year
- was it immediately marketed for let the moment you moved out
- why did you go abroad - company instruction or personal choice
- current value = £180k

Ader1

-I bought the property in July 2002.
-Original purchase price was 75 k
-No
-I have rented it from the time of purchase. I work in the hospitality industry and although not well paid, one of the perks is free accommodation.
-It's always been let except for a couple of void periods
-I went abroad from my own choice. Since returning, I've stayed with family.
-current value is around 180 k top end

Thanks for your replies.

00ec25

Ok then your exposure to CGT is complex and you need to pay for proper advice from an accountant

- you have never lived in it
- your current plans show there never was / is no intention to ever live in it
the combination of those two mean you have lost the eligibility to claim Job Related Accommodation exemption

without JRA you cannot claim letting relief since it was never your main home

as it was never your main home before going abroad, you cannot claim permitted absence period since you need to have lived there before and after the absence

therefore you are exposed to the full 105k gain less your personal allowance of 10.6. On a gain of 94.4 most of that would be taxed at 28% so worst case scenario you'd pay £26.4k of tax if sold for 180K