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    • paul332
    • By paul332 10th Apr 18, 6:50 PM
    • 11Posts
    • 3Thanks
    paul332
    CGT and Letting Relief, is this correct?
    • #1
    • 10th Apr 18, 6:50 PM
    CGT and Letting Relief, is this correct? 10th Apr 18 at 6:50 PM
    Hi all,

    I am thinking of selling a second property and am trying to estimate my CGT. I am a bit confused about how the letting relief works.

    This is how I have figured it out, please let me know if this is correct:

    - I bought a flat in 2003, I then moved to a house as my residential in 2007. The flat has been on rent since 2007.

    - There is 50,000 mortgage on the flat and I assume I may be able to sell it for 65,000.

    This then means 15,000 profit. Let's ignore the months and say it is 15 years of owning the flat (2018-2003). So this means 1,000 pounds per year.

    Tax will be exempted from the first 4 years (that is when I lived in the flat) and the last 3 years (I've read last 36 months of ownership is exempted?). So this will be 7 years that is 7000 pounds reduction.

    This is the lower than 11 (rent period) x 1000 and lower than maximum exemption of 40,000.

    So I will be exempted for 7000. 15000 - 7000 = 8000. (to make it simpler I do not take my expenses for the flat into the equation for now).

    8000 is less than the threshold so that means I do not pay any CGT.

    This sounds too good to be true! Is this correct or am I wrong somewhere? Also, the mortgage for the flat was interest only. Does this make any difference in terms of CGT?


    Many thanks for your time and input and looking forward for your helpful advice.

    David
    Last edited by paul332; 10-04-2018 at 7:40 PM.
Page 1
    • Pennywise
    • By Pennywise 10th Apr 18, 7:17 PM
    • 10,643 Posts
    • 19,973 Thanks
    Pennywise
    • #2
    • 10th Apr 18, 7:17 PM
    • #2
    • 10th Apr 18, 7:17 PM
    Ignore the mortgage, it's irrelevant. CGT is on the profit made between selling price less purchase price, (less associates solicitors fees etc).
    • 00ec25
    • By 00ec25 10th Apr 18, 7:33 PM
    • 7,081 Posts
    • 6,782 Thanks
    00ec25
    • #3
    • 10th Apr 18, 7:33 PM
    • #3
    • 10th Apr 18, 7:33 PM
    Many thanks for your time and input and looking forward for your helpful advice.

    David
    Originally posted by paul332
    follow the instructions in this post and try again with your calculations:
    http://forums.moneysavingexpert.com/showthread.php?t=5764759
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