Owning properties for rental and capital gains tax

cganesh

I currently rent and want to stay where I live. I have a lot of money (from a previous house sale) and want to invest in a buy to let flat, or even 2 flats. If I do this and eventually sell them will I pay CGT on either of them or both?

cte1111

When you sell them, you will pay CGT on the increase in value, less allowable expenses, less your CGT allowance for the year. I would suggest staggering the sales to use your allowance each year.

Look at HMRC's guide for more detailed help:
http://www.hmrc.gov.uk/cgt/property/reliefs.htm

cganesh

So do I pay CGT on both even though I have no other main house which I own ( I am renting)? And Ive looked up that site and don't get what the annual 'allowance' is!

cte1111

cganesh wrote: »

So do I pay CGT on both even though I have no other main house which I own ( I am renting)? And Ive looked up that site and don't get what the annual 'allowance' is!

That's correct. The CGT allowance is currently £10,900 (from the site that I just gave you a link to).

Cornucopia

One of the more generous exemptions allows the last 3 years of ownership to be exempt if you've ever lived in the property.

cganesh

Annual allowance or per property? and is that literally Jan-Jan annual or within a year of purchase, and I won't be living in either. Sorry to sound daft but it's all a new venture and I don't want to do anything unwise. Does it make any difference if I just buy one property?

Cornucopia

It's per property. And it's the last 36 months of ownership, whatever that happens to be when you sell. If you aren't planning to live there, it's not relevant.

Here's the HMRC document, anyway:-

http://www.hmrc.gov.uk/helpsheets/hs283.pdf

More generally, buying one property makes it simpler, just because there is one set of figures, not two. However, depending on the size of the gain and whether you were able to stagger the sales, you might lose out slightly by having one property rather than two.

If you were considering a BTL mortgage, you should be aware that many lenders require you to own your own home before taking on a BTL.

cganesh

No, don't want to have a mortgage,as I'm already paying rent on this house and I wanted to get enough rental to cover it, but do you think it's actually worth it, if I'm going to be paying 28% CGT on the value increase when I sell it/them?

ognum

cganesh wrote: »

No, don't want to have a mortgage,as I'm already paying rent on this house and I wanted to get enough rental to cover it, but do you think it's actually worth it, if I'm going to be paying 28% CGT on the value increase when I sell it/them?

You do know you will be taxed on the rent you earn too, don't you?

cganesh

Yes of course, but I'm being taxed on the interest I'm earning from my savings account which I don't think compares with rental yield on a flat. I know it's more risky if you don't get full occupancy but savings interest is so crap at the moment, I thought property would be better.

G_M

Cornucopia wrote: »

It's per property..

The CGT allowance is NOT per property. It is per tax year (April to April).

Current allowance is £10,900.

If you sold BOTH properties in the same year, you would calculate the total profit (sale price of house 1 - purchase price of house 1; PLUS sale price of house 2 - purchase price of house 2). From that total profit you deduct 10,900 to find the taxable profit.

So far better tosell one house in March and the other in April (different tax years, so two lots of allowance.)

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