Letting a house we already own, under the new BTL rules?

ProDave

We used to own 2 BTL properties but sold them a few years ago.

So now, under the new rules, how will it work if we decide to let what is currently our familly home?

We don't need to buy it, we already own it, so we won't be stung for the new stamp duty.

We are currently just under the tax threshold so currently non tax payers. The rental income will tip us to being basic rate tax payers, but comfortable under being higher rate tax payers.

We have no mortgage.

So unless I am missing something, it will be no different for us. We will still be able to claim all legitimate expenses e.g agents fees, maintenance, insurance etc from our income to calculate taxable profit.

It's "value" will be locked in at the point it ceases to be our familly home. If at some point we then sell it, we might be liable for capital gain tax if it's value has risen while it has been rented, but in the present market I don't expect it's value to ruse much if at all.so that does not worry me.

So are there any pitfalls or complications I am not aware of?

silvercar

It's "value" will be locked in at the point it ceases to be our familly home. If at some point we then sell it, we might be liable for capital gain tax if it's value has risen while it has been rented, but in the present market I don't expect it's value to ruse much if at all.so that does not worry me.

The increase in value is considered in proportion to the length of ownership. There is no valuation taken at the time of starting to let. So if it has increased in value by £200k over the whole length of ownership and it was let for half that time, you would be subject to CGT on £100k (less certain allowances which would decrease the percentage, but the principal stands).

ProDave

silvercar wrote: »

The increase in value is considered in proportion to the length of ownership. There is no valuation taken at the time of starting to let. So if it has increased in value by £200k over the whole length of ownership and it was let for half that time, you would be subject to CGT on £100k (less certain allowances which would decrease the percentage, but the principal stands).

That's interesting.

We only plan to rent it for a maximum of 2 years, and on a calculation on that basis (assuming it does not rise in value) the gain (when split between 2 joint owners each with a CGT allowance) over those 2 years as a proportion of the time we have owned it, would be under the CGT threshold. If we rented it for say 4 year then that would probably tip it into CGT due.

mrginge

Where are you going to live?

ProDave

We are in the process of building a new house (that is why we sold our previous BTL properties, and paid the CGT on them at the time of sale) The new house is not yet finished, but we will be moving into a static caravan on the building site, and then gradually moving into the new house as it takes shape. It's currently a shell completed externally and I am busy working on the insides.

silvercar

ProDave wrote: »

That's interesting.

We only plan to rent it for a maximum of 2 years, and on a calculation on that basis (assuming it does not rise in value) the gain (when split between 2 joint owners each with a CGT allowance) over those 2 years as a proportion of the time we have owned it, would be under the CGT threshold. If we rented it for say 4 year then that would probably tip it into CGT due.

Under current rules you would be exempt for the time it was your home and the last 18 months of ownership. As a proportion of the total time owned, that would leave you with only a small percentage, add in letting relief and your allowances and you probably don't have much to worry about.

ProDave

Okay, so CGT liability is limited or manageable.
I don't have to worry about paying the higher stamp duty as we already have it.
We are and will remain basic rate tax payers.
There is no mortgage so not bothered if that is no longer an allowable expense against income.

So it seems there is no particular "issue" with renting the house then?