Inheritance - £300k

bigadaj

kidmugsy wrote: »

I know you get tax relief on a BTL mortgage taken out to buy a property. Would that work if the OP already owns the flat?

If it didn't then another option would be to sell the flat and buy something better and more expensive with a BTL mortgage, and ensure that that is a property you might want to live in yourself someday.

I believe that you can remortgage up to a value at which the property became buy to let, in this case presumably when the property was inherited. Maximum loan to value for but to let is probably 75% in most cases.

Obviously the yield on this property is relatively low, particularly as it seems to be gross, and buying one or more flats or houses in a cheaper area would double the yield, but that depends on the location of the property and the landlord and whether they manage it or not.

andrewm1981

Hi guys,

Firstly, yes, you guessed it, the flat is in London. Well, a nice leafy suburb :-)

I'm in the process of getting a mortgage on a house to live in, so I doubt very much I'd be able to get a buy-to-let mortgage on the flat.

If the flat increased in price would I have to pay capital gains tax on it? Even if ultimately sold it in 10 years to buy a bigger house?

If so, Im Thinking investing elsewhere, as property would be a lot of hassle with little return!

bigadaj

andrewm1981 wrote: »

Hi guys,

Firstly, yes, you guessed it, the flat is in London. Well, a nice leafy suburb :-)

I'm in the process of getting a mortgage on a house to live in, so I doubt very much I'd be able to get a buy-to-let mortgage on the flat.

If the flat increased in price would I have to pay capital gains tax on it? Even if ultimately sold it in 10 years to buy a bigger house?

If so, Im Thinking investing elsewhere, as property would be a lot of hassle with little return!

So long as you have evidence of the rental income you receive then you would be able to get a buy to let mortgage based on that rather than your income, though some lenders have limitations like minimum £20k income and during voids you'd have to cover the mortgage payments yourself.

You would be liable for capital gains tax on the flat which could be significant if sold in a few years.

Property is hassle but the returns can be good. And you need to do both specific and general research on the property, local market, maintenance etc.

atush

yes you would be liable for capital gains tax, above your annual limit.

You can get two limits (ie approx 22k) if you have a spouse and transfer half the house to them.

andrewm1981

If I read it right, the allowance is around £10k, so does that accumulate, ie if the property goes up by £200k in 25 years would there be a fee to pay?

I've got so many questions about investments etc, is the best plan to get an IFA rather than keep asking Qs?

gadgetmind

No, your capital gains tax allowance is per year and can't be rolled over. There is now no "taper relief" either, so any gain over the annual allowance is subject to tax at 18% or 28%.

http://www.hmrc.gov.uk/cgt/property/basics.htm

kidmugsy

A common way to avoid CGT is to die. It's rather an extreme strategy, though.