Buy to let mortgage - CGT?

_Sam_

Apologies if this is a stupid question, I have never come across CGT and now a bit worried - can it apply if you sell a second home which has BTL mortgage, even though that home was never let (it basically stood empty for couple of years)?

user1977

Broadly speaking, CGT applies to all properties, other than your main residence. Doesn’t matter whether it was let or had a mortgage.

_Sam_

Oh I see thank you it was a main residence and when we bought the new house we took some equity from the old house to pay for it, and arranged a BTL mortgage on that equity. It just occurred to me if this mortgage now means the old house would be liable to CGT

silvercar

It isn’t the fact you have a BTL mortgage that means you may have a liability for CGT. It’s the fact that you owned a property that for a period of time was not your main residence. Overlaps for a short period are exempt, but otherwise you need to calculate how much CGT you are liable for.

BarelySentientAI

_Sam_ said:

can it apply if you sell a second home?

Yes.  The rest of your question doesn't really matter.

_Sam_

I understand now thank you! It looks like we might be liable for a short period. Interesting that for the purposes of stamp duty the allowance is 3 years, but for CGT is 2 years.

p00hsticks

_Sam_ said:

I understand now thank you! It looks like we might be liable for a short period. Interesting that for the purposes of stamp duty the allowance is 3 years, but for CGT is 2 years.

No it's not 2 years - I think if a property has been your main residence at some point you are allowed an extra nine months in the CGT calculation, but that's the only ;allowance' as such. If there's any time where a property you owned wasn't your main residence, then there's a potential CGT liability and you need to do the calculation to see if anything is owed.    

Broadly speaking off the top of my head the CGT calculation is something like

(selling price - purchase price - buying and selling costs - costs of any allowable improvements)
multiplied by
 
(number of months where it wasn't your main residence - 9) / total number of months owned   
Tax when you sell property: Work out your gain - GOV.UK (www.gov.uk)

_Penny_Dreadful

_Sam_ said:

I understand now thank you! It looks like we might be liable for a short period. Interesting that for the purposes of stamp duty the allowance is 3 years, but for CGT is 2 years.

You are still not getting it.  There isn't a CGT allowance in the way that you are thinking.  When you sell a property there are various reliefs you can apply to the capital gain, the most common one being Private Residence Relief (PRR). PRR applies to the period a property was your only or main home plus the final 9 months of ownership.  For most people selling a property they are selling their only or main residence that has only been their only or main residence for the whole time they have owned the property therefore the PRR means there is no CGT to pay on the sale of the property.

In your case the second property is not your only or main home therefore you will not receive PRR for the full length of ownership.  It sounds like to was your only or main residence up until 2 years ago so you will receive PRR for the months it was your only or main residence plus the final 9 months of ownership but not for the full period of ownership.  If you give us some figures such as purchase price, expected sale price and length of ownership I could do a quick, high level calculation for you.

_Sam_

Thank you! The purchase price was £85k, the most we’d sell it for is £200k. No extensions etc at the time of ownership, roughly since Feb 2013 and we completed on the new house in Feb 2022. 

By 2 years I mean the 24 months after buying a new house in the circumstances one is unable to sell the old house. That’s why I was comparing it to stamp duty, the allowance of time in case the sale of the old house doesn’t happen straight away.

It took a long time to move possessions due to our circumstances and the same circumstances then meant we could not market the house and only now preparing it for sale. I had a look on the guidance briefly but not sure if there is a specific list on which circumstances could qualify and which could not, or do they look at facts of each case individually. 

BarelySentientAI

So you have owned the house for 134 months, and lived in it for as your primary residence for 108 of them.

That's PRR for 117 of 134 months.

Capital gain of £115k, ignoring any costs at either end and improvements.

Makes (I think) a relief of about £100k, leaving CGT to be paid on the other £15k.  Something like £2k of CGT.

Do it properly with your actual numbers : https://www.gov.uk/tax-sell-property/work-out-your-gain

silvercar

BarelySentientAI said:

So you have owned the house for 134 months, and lived in it for as your primary residence for 108 of them.

That's PRR for 117 of 134 months.

Capital gain of £115k, ignoring any costs at either end and improvements.

Makes (I think) a relief of about £100k, leaving CGT to be paid on the other £15k.  Something like £2k of CGT.

Do it properly with your actual numbers : https://www.gov.uk/tax-sell-property/work-out-your-gain

CGT allowance of £3k each if not used elsewhere.