Your advice please

andyasw

My property is on the market. I can put a 60% deposit on another property and borrow the remaining 40% on an interest only btl loan with the intention of letting it for however long it might take to sell my current property. Once sold we would then move into the btl house. What are the the downsides to this ie tax implications, capital gains etc. I realise if we move into the new property we would be hit with an early redemption penalty if the btl was paid off early but would maintain payments in order to overcome this. Your advice is most welcome.

holly_hobby

If you don't move into the Buy To Let (BTL) from outset, then upon sale, you will exposed to Capital Gains Tax (CGT) on the duration when it wasn't your main residence (which is in whole months).

Of course this will be offset by each beneficial owners annual unused CGT allowance at the time (currently £10,900 per person - but will be higher subject to HMRC increases, when you sell in yrs to come).

When you move into the BTL as your primary residence you will need to advise the lender, whereby they will re-assess and change onto a residential mge (as you say subject to any Early Repayment Charges (ERCs that will apply to the BTL arrangment).

But, why not rent your current home out (under consent to let permissions of your current lender), which will still attract full primary residence relief (PRR)if you sell within 36 mths of vacating, and pch and move into your new home under a straight residential mge, which will avoid any cgt exposure on disposal (assuming full PRR covers the whole ownership period), whilst also avoiding BTL ERCs ?

Hope this helps

Holly x