Capital Gains Tax on a Buy to Let

Spannermonkey159

I kave a query regarding CGT, my question is this :
My wife has a buy to let property in her name which we bought in 1996 for about £25k.
There is an outstanding mortgage of £123,750 and the current valuation is £215,000.
If the property were sold what is regarded as the taxable gain. Is it allowable to deduct the outstanding mortgage from the sale price in determining the gain, or is the gain the difference between the sale price, say, £215,000 and the original purchase price of £25k.
Any help very much appreciated, thanks advance

[Deleted User]

Mortgage completely irrelevant. Presumably she never lived in the property in which case it’s sale price less cost price less cost of capital improvements less costs associated with buying and selling to arrive at the gain from which the annual exemption can be deducted. 

eskbanker

The mortgage is irrelevant, the gain is disposal price minus purchase cost, less any allowable expenses:

https://www.gov.uk/tax-sell-property/work-out-your-gain

BikingBud

Spannermonkey159 said:

I kave a query regarding CGT, my question is this :
My wife has a buy to let property in her name which we bought in 1996 for about £25k.
There is an outstanding mortgage of £123,750 and the current valuation is £215,000.
If the property were sold what is regarded as the taxable gain. Is it allowable to deduct the outstanding mortgage from the sale price in determining the gain, or is the gain the difference between the sale price, say, £215,000 and the original purchase price of £25k.
Any help very much appreciated, thanks advance

I know the mortgage is irrelevant as regards CGT but wow that seems like you take quite a knock! Especially as you still have mortgage liability of 57% of the current value.

Would be interested to see what the overall position works out as and if it does support the viability of BTL vice other routes?

Grumpy_chap

Spannermonkey159 said:

I kave a query regarding CGT, my question is this :
My wife has a buy to let property in her name which we bought in 1996 for about £25k.
There is an outstanding mortgage of £123,750 and the current valuation is £215,000.
If the property were sold what is regarded as the taxable gain. Is it allowable to deduct the outstanding mortgage from the sale price in determining the gain, or is the gain the difference between the sale price, say, £215,000 and the original purchase price of £25k.
Any help very much appreciated, thanks advance

No, you cannot deduct the mortgage from the gain.

You can deduct allowable costs to purchase and costs to sell.  That is things like legal fees, stamp duty (though the property was probably below the threshold in 1996), estate agent. 

There is also a small annual allowance at the time of sale that is not subject to CGT.  That is one allowance, not an allowance for every year.

TheGreenFrog

BikingBud said:

Spannermonkey159 said:

I kave a query regarding CGT, my question is this :
My wife has a buy to let property in her name which we bought in 1996 for about £25k.
There is an outstanding mortgage of £123,750 and the current valuation is £215,000.
If the property were sold what is regarded as the taxable gain. Is it allowable to deduct the outstanding mortgage from the sale price in determining the gain, or is the gain the difference between the sale price, say, £215,000 and the original purchase price of £25k.
Any help very much appreciated, thanks advance

I know the mortgage is irrelevant as regards CGT but wow that seems like you take quite a knock! Especially as you still have mortgage liability of 57% of the current value.

Would be interested to see what the overall position works out as and if it does support the viability of BTL vice other routes?

The vast majority of the mortgage does not relate to the purchase price though.  Unless used for capital improvements to the property, OP has already monetised a large part of the increase in value.

Spannermonkey159

Thanks to everybody who posted a reply so far, really appreciated even if it made hard reading.