What are the tax implications...

artisan_2

I inherited the flat I live in 12 years ago (I received a 50% share along with my sister). I bought my sisters share around 7 years ago.

I am now thinking of raising equity from the flat (now worth 120k+ with a mortgage of 25k). the equity will help my girlfriend and I purchase a new property with good deposit.

Do I have any tax implications with the flat at this time ? Furthermore what happens at a later date when I move to sell the flat - I know I will be liable for tax but at what point is the base line for growth taken upon which the tax payment is calculated?

Cyber pint in advance for any advice...:T

Mathsguy

Are you talking about capital gains tax? You don't have to pay any CGT on property if it is your primary residence. (You say you have lived in it for 12 years?)

firstinflight

What do you mean when you say you're going to raise equity? Selling or re mortgaging? Do you intend to just sell up and move, or to own 2 properties at once?

Regardless, you should be covered by Principal Private Residence relief, and no CGT will be due on the sale.

artisan_2

Thanks for these..

I am considering a BTL mortgage to take around 70k to pay off current 25k mortgage and use rest towards other deposit on new joint property. The flat is in a recognised 'desireable area' and renting should not be a problem due to its location and condition.

The tax question is askis in relation to the time when I do go to sell the flat - say in 5/10 years time..... how does the tax due on that sale work ifit is/is not my primary residence at that time?

CLAPTON

when you come to sell the property CGT will be liable but you will have several reliefs

a. Principle Residence relief
the gain (difference between aquisition value and selling price less certain costs) will be reduced for the period it was your PPR plus the last three years

plus.
B. lettting relief which is the lesser of period let, PPR or 40,000


you of course have you own CGT allowance of 9,600

Its likely you will pay little or nothing but it depends upon the numbers.


If you let you will be subject to income tax... basically the rent less the interest on the mortgage (max of the acquisition price) and various items of maintenance etc.