CGT on sale of property

chelle_belle

Hi,

I'm currently selling a property that i've been letting out for the past 6 years. I have submitted self assessments throughout showing that the income from the property does not exceed the outgoings.

I bought the house for £120k and am selling for £120k. By the time i pay sols and estate agents I am looking at walking away with approx £25k.

Whilst I was completing the sols forms I noticed that I have to give my NI number and permission for them to contact Inland Revenue regarding the sale. Do you think this means that I will be liable to pay Capital Gains Tax on the £25k even though the property has run at a loss for the past 6 years and i am selling for the same amount I paid for it?

Any help would be gratefully received.

Many thanks

chelle_belle

Also, not sure if it's worth mentioning but i haven't ever bought a second property (jointly or otherwise) since buying the property to let out.

uknick

May I ask your secret as to how you can sell for the same price as you bought and still make £25k profit?

chelle_belle

uknick wrote: »

May I ask your secret as to how you can sell for the same price as you bought and still make £25k profit?

But it's not really profit is it? I put a 10% deposit down when I bought it and it's just what i've chipped away at the mortgage in the 6 years of having it. By the time i've paid out for repairs, landlord insurance, decorating, safety certs and homecare etc plus the mortage which wasn't covered by the rent i'd probably have more in a savings account now than i'm getting back from this and it would have been a lot less stressful!

zygurat789

chelle_belle wrote: »

But it's not really profit is it? I put a 10% deposit down when I bought it and it's just what i've chipped away at the mortgage in the 6 years of having it. By the time i've paid out for repairs, landlord insurance, decorating, safety certs and homecare etc plus the mortage which wasn't covered by the rent i'd probably have more in a savings account now than i'm getting back from this and it would have been a lot less stressful!

The mortgage is NOT a cost you are allowed to deduct from your rental income before tax. Only the mortgage interest is allowable.
Please tell us that was just a slip of the fingers.

noh

If you paid £120K for the house and are selling for £120k then there is no gain and therefore no CGT to pay.
Are the figures you quoted in your OP correct?

zygurat789

chelle_belle wrote: »

Also, not sure if it's worth mentioning but i haven't ever bought a second property (jointly or otherwise) since buying the property to let out.

It doesn't make any difference nor would it if you had owned another property bought before this one.

chelle_belle

noh wrote: »

If you paid £120K for the house and are selling for £120k then there is no gain and therefore no CGT to pay.
Are the figures you quoted in your OP correct?

Hi, Yes they are thanks very much for clarifying that for me. I wasn't sure if CGT is payable on the lump sum or just if you sold it for more than you paid for it and if it was a house you weren't living in.

I appreciate your help thanks again.

zygurat789

chelle_belle wrote: »

Hi,

I'm currently selling a property that i've been letting out for the past 6 years. I have submitted self assessments throughout showing that the income from the property does not exceed the outgoings.

I bought the house for £120k and am selling for £120k. By the time i pay sols and estate agents I am looking at walking away with approx £25k.

Whilst I was completing the sols forms I noticed that I have to give my NI number and permission for them to contact Inland Revenue regarding the sale. Do you think this means that I will be liable to pay Capital Gains Tax on the £25k even though the property has run at a loss for the past 6 years and i am selling for the same amount I paid for it?

Any help would be gratefully received.

Many thanks

CGT is calculated:-
Sale proceeds after expenses ie legal, adverting etc.
Less cost inc expenses legal etc.
The diference if profit is taxable after deducting the annual exempt amount of £11,000. tax is payable at 18% for basic rate band and 28% for higher rate band.
On the figures you have given there would appear to be no liability, however, I am not so sure about your income tax.

On_The_Up

" I have submitted self assessments throughout showing that the income from the property does not exceed the outgoings."

The fact you say you have made no profit from the property should be an alarm bell. You will have almost certainly made profits over that time as remember you can only deduct the interest element of any mortgage payment when calculating your profits. I would seek some advice from a trained accountant ASAP as it could come back to bite you.

As for CGT, as it isn't your primary residence, you will pay tax at the difference between the sales price and the purchase price,. The first circa £10k of gains each year is not subject to CGT and there are various deductions that can be made. Again, get some advice from a professional.

uknick

On_The_Up wrote: »

" I have submitted self assessments throughout showing that the income from the property does not exceed the outgoings."

The fact you say you have made no profit from the property should be an alarm bell. You will have almost certainly made profits over that time as remember you can only deduct the interest element of any mortgage payment when calculating your profits. I would seek some advice from a trained accountant ASAP as it could come back to bite you.

Not necessarily will a loss lead to alarm bells with HMRC, if that's who you meant. My brother has rented his 2nd property to his mother in law for over 10 years. He has an interest only mortgage on the property. His mother in law pays the rent using housing benefit but the maximum she can claim is below the amount he pays in interest. Therefore he's been making a loss for the last 10 years or so and has never mentioned HMRC taking any interest in him.