Sell a flat and invest the proceeds

aaaaancly

Hi,

I have a flat worth £250k that I bought 24 years ago for £51k to live in. After 4 years I inherited a two bed flat so moved there and let the one bed. 

After letting it pretty solidly for 20 years I'm wondering about selling up and investing through a fund manager.

Rental potential is £1100 per month tops.

Wealth manager is confident he can get me £1000 per month after fees and still grow the pot a bit "depending on the market"

Lease is down to 93 years and the freeholder is a poor communicator so I don't relish trying to increase it.

I have capital gains due but "luckily" I have £32k Negative capital gains from last year to use against it.

I'm 55, no family, no mortgage, income from another flat, no pension, some other investments with the fund manager who came highly recommended a few years ago by a friend who has used him for nearly 20 years.

Am I being silly? Tax seems to be a bit less on dividends than rental income, there will be no boilers to replace, service, gas Safe, electric safe, insurance, grass to cut, shed roof to repair, cooker to fix etc.

It has been pretty low maintenance really but I've just refurbished it after a 10 year tenancy and it looks fresh and clean and I don't relish the idea of doing it all again in a few years time.

Is selling and investing a viable option or am I just being lazy? 

I probably think differently to the majority as I have no partner or children, so there's no one to leave it to. If I had children I wouldn't consider selling, but I don't, and I only have xx years left to worry about.

I don't really have many people to discuss this with so thought I would post here as I have read good discussions here in the past.

Thanks for looking.

MX5huggy

How much are you going to get out of a sale? After CGT and fees?

Look at pensions, do you have any income you can direct at a pension so getting tax relief at what rate? 20% 40% salary sacrifice 32%? 

The S&S ISA £20k and repeat fir the next X years.

aaaaancly

I'm hoping to clear £250k. Had it valued at £265k.
I think I should have enough negative capital gains plus my annual allowance to cover ~£35k CGT but need to run it past my accountant.

Haven't thought about pensions. Have always thought that the rental income will be enough.

I'm a 20% tax payer.

I paid the mortgage a bit early on the rental flat and put that into the pot that the investment manager looks after.  He is moving my investments under the ISA umbrella every year to use my allowance.

Steve182

There are few BTL fans on this board. The main problem you have now is that you have already accrued a potentially huge CGT liability at the point of sale.

For that reason I might be tempted to hold onto it, but then a future goverment could make life even worse!

aaaaancly

I had £41k CGT losses last year plus have £4k left of my allowance this year. If my capital gain is £200k and I pay tax at 18% (out of my knowledge area now) the. I owe £36...but can offset that using my losses I think?

I'm a bit worried that the government have a lot of money to recoup....

Steve182

Im pretty sure you will pay 28% on the bulk of it but others will correct me if i'm wrong.

aaaaancly

Hmm ..that's why I'm speaking to my accountant tomorrow. I did find an online calculator but it wasn't straightforward.

Is it right that I can negate the lot by living there for two years?

aaaaancly

It has been empty for the last year and I have been paying council tax. Does that count towards the equation?

Steve182

You may be better off posting that question in the tax saving section of this forum.

Money_Grabber13579

So you’ve got a c.200k capital gain, which will be reduced by any losses and annual allowance you have (rather than the tax liability being reduced by the amount of losses etc), so that might reduce the gain to 159k less whatever annual allowance is left (have you really only got 4K left in the first day of the new tax year?)

Then, you might also qualify for a bit more relief in the form of principal private residence relief and possibly also lettings relief (it’s been quite a while since I looked at those calculations and the rules have changed significantly in the past few years so I won’t comment specifically on how they work but you might find that at least 4/24 of the gain is exempt)

bostonerimus

Run a mile from anyone who promises you any sort of return. It seems to me that the wealth manager is onto a good thing and you are taking all the risk and paying to do it.