tax on a property ive owned and renting out

kelster101757

Hello all,

I've purchased my first house by myself and 7 years later I now have a child and a partner and want a new larger house with my family. I want to rent out my current (first) house that I own by myself and buy the new house with my partner. The first house is in the city centre and easy to find a tenant that covers the rent with profit.  I bought the house for £156,000 and its now worth £240,000, a difference of £84,000.  If I was to sell the house, there would be no tax.  However, I plan rent out the house which means it would become my 2nd residence and i would be eligible for tax.  If i rent out the property for say 10 years and the property price increases to say 350,000, would i pay tax on the increase from the 240,000 or from when i first bought it at 156,000?  Any help or tips for finding this information is greatly appreciated.  

anselld

It is calculated from when you first bought but you have exempt period during which it was your residence plus the final 9 months.  So if you rent for 120 months you lived for 84 months you multiply the overall gain after allowable costs by   (120-9)/(120+84).  Then you take off your CGT allowance for the year of sale.
HMRC have a calculator ...
https://www.gov.uk/tax-sell-property/work-out-your-gain

Don't forget if you retain your property you will pay an additional 3% SDLT surcharge on your new purchase.

user1977

...all assuming the tax rules are still the same in 10 years' time, of course!

dimbo61

Will the rent and your Income push you into higher rate tax ?
Are you still in a fixed rate deal.
Do you want to be a Landlord ?
Do you know what's involved ?
EPC EICR GSC pat testing right to rent,how to rent, deposits, tenancy agreement addendum, guarantor forms, fit for Habitation, good home standards, CO alarm, fire safety, legionnaire checks, The hundreds of laws and S21,S8 etc

Have you looked at the rental market is your home suitable ? Kind of tenants ?
Maybe £84,000 deposit plus 3%stamp duty saving might be better 🤔

Dazed_and_C0nfused

The first house is in the city centre and easy to find a tenant that covers the rent with profit

As you can't deduct mortgage interest as an expense from rental income any more for tax purposes HMRC's view of the profit may be quite a bit different (higher) to yours.

You can claim a tax deduction in relation to the interest but that doesn't stop the profit being higher and that can impact other things like HICBC 

kelster101757

dimbo61 said:

Will the rent and your Income push you into higher rate tax ?
Are you still in a fixed rate deal.
Do you want to be a Landlord ?
Do you know what's involved ?
EPC EICR GSC pat testing right to rent,how to rent, deposits, tenancy agreement addendum, guarantor forms, fit for Habitation, good home standards, CO alarm, fire safety, legionnaire checks, The hundreds of laws and S21,S8 etc

Have you looked at the rental market is your home suitable ? Kind of tenants ?
Maybe £84,000 deposit plus 3%stamp duty saving might be better 🤔

Some good questions :-)  

Will the rent and your Income push you into higher rate tax ?    not at the moment but i could always pay more into my pension if it did become a problem, my pension does need a top-up.  

Are you still in a fixed rate deal?     Runs out in December so free to pick a new deal for christmas

Do you want to be a Landlord ?    It wasn't one of my life goals but I have a house to be rentable area so wont be without tenents so in that way seams sensible.  

Do you know what's involved? yes but i would imagine theres a lot more to know and learn 

EPC EICR GSC pat testing right to rent, how to rent, deposits, tenancy agreement addendum, guarantor forms, fit for Habitation, good home standards, CO alarm, fire safety, legionnaire checks, The hundreds of laws and S21,S8 etc

Have you looked at the rental market is your home suitable ? Kind of tenants ? Yes, city Centre house, 2 bedrooms with 3 bathrooms and garden, 5 mins from train station and bus station and 15 minute walk to city square.  

Maybe £84,000 deposit plus 3%stamp duty saving might be better 🤔  This is the thought going through my head.

Thanks for the thought provoking questions.