Selling a 2nd home

Charismac2404

Hi all,

I have a somewhat unusual situation i guess, and need some advice on tax implications.

I have a house i bought in 2007 for 91k, it is owned outright. i lived there until 2012, the house was then rented out from 2012-2018. I currently live in rented accomodation and the house i own is lying empty. I am considering selling this house which is currently worth around 80k, to free up some capital, and intend to use around 60k to purchase another rental property and purchase a piece of land for future development. I will continue to live in rented accomodation as i cannot afford a house in the area i live in at present and am not in a position to get a mortgage.

I understand that i will not have any capital gains tax to pay, as the house is worth less than i paid for it. What i dont know is what happens with the profit from the sale... as the house is owned outright, i will be clearing around 75k... does this get classed !!! income? Will i have to pay tax on that amount? Or can it just go in to my bank and i can spend it how I please? Sorry if these are silly questions, nobody i know seems to have any clue.
Thanks

da_rule

There is no ‘profit’. You are receiving less than you spent.

Even if there was a profit, it would, in these circumstances be a gain and therefore CGT would apply.

The amount of CGT would, even if you did make a profit, be low to non-existent as you would be able to apply Private Residence Releif and Letting Relief.

agrinnall

No it's not classed as income, no you won't pay tax on it, yes you can spend it however you wish.



Why is the property worth so much less than it was 12 years ago? Is there something simple you can do that would increase the selling price?

AnotherJoe

It's a loss which you should file on your tax return and carry it forward so (hopefully) you can offset against future capital gains.

da_rule

AnotherJoe wrote: »

It's a loss which you should file on your tax return and carry it forward so (hopefully) you can offset against future capital gains.

Not forgetting to reduce the loss in accordance with the private property relief rules.

Charismac2404

Thank you all for your replies, this has clarified things for me.

The house was purchased just months before the property crash and the area has been slow to recover. When i bought it, it was in showhome condition, now it needs a bit of TLC. Mainly cosmetic, new flooring fresh decor etc plus the entire fence needs replacing. I haven't had it valued yet as its looking a bit sorry for itself atm, ive just gone by the sale prices of houses on same street.