Renting out our property to rent somewhere else

Addison89

Hello, we are considering renting out our property to move outside of London. We have tried to sell with no luck, didn’t even get any viewings in the last month even though we reduced price. Don’t want to further reduce it as we invested in redecorating and it would produce a loss. It’s been on the market for 3months.

I have done some reading and I understand we would need to pay income tax, EA fee (I think it’s 4%) and landlords insurance. Obviously maintenance cost when needed. Mortgage provider needs to be updated about our situation.

My question is, is there a way to avoid paying CGT? 

Thanks so much

p00hsticks

Addison89 said:

My question is, is there a way to avoid paying CGT? 

As the name suggests, the tax is on any gain you make, and from what you say about avoiding taking a loss then at present the house hasn't actually risen significantly in value ? 

If there isn;t a gain, then there's no capital gains tax to pay.....

DullGreyGuy

p00hsticks said:

Addison89 said:

My question is, is there a way to avoid paying CGT? 

As the name suggests, the tax is on any gain you make, and from what you say about avoiding taking a loss then at present the house hasn't actually risen significantly in value ? 

If there isn;t a gain, then there's no capital gains tax to pay.....

Obviously there is an exemption on CGT if the property is the sellers main residence. 

Dont know the answer but what happens if...

1) Its currently their main residence
2) They rent it out for 2-3 years
3) They move back into the home returning it to their main residence and then put it back on the market?

theartfullodger

Addison89 said....

My question is, is there a way to avoid paying CGT? 

Thanks so much

Yeah, easy, sell for a low price, only just above what  you bought it for.  Job done!

Some people think the right thing to do is to pay full tax obligations promptly . The country (i.e. all of us) needs the tax income.

BTW there are more than 10 taxes a landlord may be liable for.

Best wishes to all.

Albermarle

Don’t want to further reduce it as we invested in redecorating and it would produce a loss

Nor sure I quite follow this.

Let's say the average house price in London is around £700K .

Redecorating, say the majority of a 3 bed semi, would cost anything from £200 ( if you did it yourself ) to maybe £7K for someone to do it. So if a bit of both lets say £5K.

It seems highly unlikely that the cost of decorating is significant, compared to the price of the house, and that it would tip you into a loss ?

saajan_12

Specific comments in line, but just sell up.. you've already made the loss, and it's a false economy waiting. You'll just spend more in tax and managing a rental. 

Addison89 said:

Hello, we are considering renting out our property to move outside of London. We have tried to sell with no luck, didn’t even get any viewings in the last month even though we reduced price. Don’t want to further reduce it as we invested in redecorating and it would produce a loss. It’s been on the market for 3months. - then it's still overpriced compared to the current market value. That means you've already lost the value, and it's just a question of realized or unrealized. If you think it'll go back up in future, then why wouldn't a property outside London be cheaper now and go up in future? 

I have done some reading and I understand we would need to pay income tax, EA fee (I think it’s 4%) and landlords insurance. - where are you getting 4% agents? If you mean a letting agent to find a tenant, manage the day to day, then that's 8-14% depending on how much of it they do. Plus legally it's still your risk. 
 Obviously maintenance cost when needed. Mortgage provider needs to be updated about our situation. - for a year you may get CTL, with no change to the cost. After that they'll likely want you to switch to a BTL mortgage, which is higher interest. 

My question is, is there a way to avoid paying CGT? - there are a number of allowances so depends on how much the gain is. But no, CGT (after allowances) is due pro-rata for the time you didn't live there. 

Thanks so much

Addison89

theartfullodger said:

Addison89 said....

My question is, is there a way to avoid paying CGT? 

Thanks so much

Yeah, easy, sell for a low price, only just above what  you bought it for.  Job done!

Some people think the right thing to do is to pay full tax obligations promptly . The country (i.e. all of us) needs the tax income.

BTW there are more than 10 taxes a landlord may be liable for.

Best wishes to all.

“Some” people, unlike many others in this country, have been paying loads of tax because “some” people never exploited the broken tax and benefit system you have here. 

Thanks for the condescending useless comment.

Addison89

saajan_12 said:

Specific comments in line, but just sell up.. you've already made the loss, and it's a false economy waiting. You'll just spend more in tax and managing a rental. 

Addison89 said:

Hello, we are considering renting out our property to move outside of London. We have tried to sell with no luck, didn’t even get any viewings in the last month even though we reduced price. Don’t want to further reduce it as we invested in redecorating and it would produce a loss. It’s been on the market for 3months. - then it's still overpriced compared to the current market value. That means you've already lost the value, and it's just a question of realized or unrealized. If you think it'll go back up in future, then why wouldn't a property outside London be cheaper now and go up in future? 

I have done some reading and I understand we would need to pay income tax, EA fee (I think it’s 4%) and landlords insurance. - where are you getting 4% agents? If you mean a letting agent to find a tenant, manage the day to day, then that's 8-14% depending on how much of it they do. Plus legally it's still your risk. 
 Obviously maintenance cost when needed. Mortgage provider needs to be updated about our situation. - for a year you may get CTL, with no change to the cost. After that they'll likely want you to switch to a BTL mortgage, which is higher interest. 

My question is, is there a way to avoid paying CGT? - there are a number of allowances so depends on how much the gain is. But no, CGT (after allowances) is due pro-rata for the time you didn't live there. 

Thanks so much

Thank you, that’s actually helpful.

theartfullodger

Addison89 said:

theartfullodger said:

Addison89 said....

My question is, is there a way to avoid paying CGT? 

Thanks so much

Yeah, easy, sell for a low price, only just above what  you bought it for.  Job done!

Some people think the right thing to do is to pay full tax obligations promptly . The country (i.e. all of us) needs the tax income.

BTW there are more than 10 taxes a landlord may be liable for.

Best wishes to all.

“Some” people, unlike many others in this country, have been paying loads of tax because “some” people never exploited the broken tax and benefit system you have here. 

Thanks for the condescending useless comment.

Thank you for your kind words... 

Best wishes to all.

macman

4% agent fee?  Depends on whether you want to just get them to find a tenant, or manage the tenancy ongoing (how will you do that otherwise if not local)? At least 10% in that case.
You will have to pay for: EPC, GSC, EICR, deposit protection, landlord licencing fee (if applicable to your London LA), possible higher mortage payments. Are you ready to take on the numerous and onerous responsibilities of a professional LL? 
How long do you intend to let for, because once let, you cannot guarantee that it will take less than a year to remove a tenant who declines to vacate.
Why do you think so many experienced LL's are selling up and existing the business? Do you know something they do not?
And no, you cannot 'avoid' a potential CGT liability upon the eventual sale.

km1500

if the house is your main residence and you have for example lived there15 years then move out and let it for three years. 

assume it has increased in price since you bought it. 

the cgt payable is 3/18 of the gain but you all allowed to offset buying expenses selling expenses any genuine improvements etc. that is also an overlap period discard which I believe is nine months


https://www.gov.uk/tax-sell-home/let-out-part-of-home