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    • 13Kent
    • By 13Kent 17th May 19, 11:09 AM
    • 1,066Posts
    • 4,068Thanks
    13Kent
    Capital gains tax - to sell BTL properties before 2020?
    • #1
    • 17th May 19, 11:09 AM
    Capital gains tax - to sell BTL properties before 2020? 17th May 19 at 11:09 AM
    We currently rent 2 properties out, both sets of tenants are moving out. With the changes to Landlords tax and tenants rights we are considering selling and reducing our current mortgage with the equity but are concerned about how much the capital gains tax we might have to pay, and how much we may have to pay in a couple of years with the changes if we don't sell.

    Property 1

    Bought for 43,000 in 1992.
    Lived there until 2002 when we began letting it.

    Current value conservatively 133,000.


    Property 2

    Bought for 125,000 in 2010 as a BTL,

    House next door recently sold for 125,000 - so no profit.

    Hubby in higher tax bracket, and I don't pay tax.

    Property 1 is owned 95% me 5% hubby
    Property 2 is 50/50.

    Would be very grateful if someone could help with an approximate figure of what it would cost us I tried to work it out myself but got a bit confused. Thank you.

Page 1
    • pjcox2005
    • By pjcox2005 17th May 19, 11:25 AM
    • 623 Posts
    • 702 Thanks
    pjcox2005
    • #2
    • 17th May 19, 11:25 AM
    • #2
    • 17th May 19, 11:25 AM
    High level, if you sold it at those values then your unlikely to have any capital gains tax.


    Property 1.


    Increase in value is 90,000
    Remove costs of buying/selling c.2k as an estimate so 88,000


    The time it was your home plus the final 18 months of ownership is exempt as a proportion (should be done accurately but using years as an example).


    So 10 years lived plus 1 1/2 years is 11 1/2 over a total 27 year period. Therefore 11.5/27 is exempt being 37,481.


    So 50,519 still potentially taxable.


    As it was your own residence you can then have relief for the period you let it out and both you and your husband can get this.


    This is the lower of:


    Claim Letting Relief

    You can get the lowest of the following:
    • the same amount you got in Private Residence Relief
    • 40,000
    • the same amount as the chargeable gain you made from letting your home
    You'll also both have your annual exemption of 12k each.


    So between them I'd expect they'd remove all gain. If not you may have to transfer part of the property into your own name so it's a more equal split.


    Property 2


    Currently selling at the price paid so no gain. Potentially a capital loss due to cost of buying and selling.


    For both properties you may also have any costs of capital improvements that you could deduct.
    • 13Kent
    • By 13Kent 17th May 19, 11:35 AM
    • 1,066 Posts
    • 4,068 Thanks
    13Kent
    • #3
    • 17th May 19, 11:35 AM
    • #3
    • 17th May 19, 11:35 AM
    Thank you so much for taking the time to do that.

    Sorry for sounding stupid but does this mean we wouldn't pay any CGT? That's how I worked it out but didn't think it could be correct!!


    Would this change if we sold after the changes in 2020?

    • silvercar
    • By silvercar 17th May 19, 11:56 AM
    • 38,992 Posts
    • 162,536 Thanks
    silvercar
    • #4
    • 17th May 19, 11:56 AM
    • #4
    • 17th May 19, 11:56 AM
    After 2020:

    Property 1.

    Increase in value is 90,000
    Remove costs of buying/selling c.2k as an estimate so 88,000


    The time it was your home plus the final 9 months of ownership is exempt as a proportion (should be done accurately but using years as an example).


    So 10 years lived plus 3/4 years is 10 3/4 over a total 28 year period. Therefore 10.75/28 is exempt being 33,786.


    So 54,214 still potentially taxable.

    your 95% is 51,504, his 5% is 2,710.

    His is within his CGT allowance.

    You have a CGT allowance of 12.5k, leaving 39,004. Then deduct any personal allowance you haven't used. The remaining amount will be taxed at 18%. (a very small amount may be at 28% but the 20/21 values haven't been announced yet, so I wouldn't worry).

    Note that any loss on property 2 can be put against the gain on property 1.

    Basically, you could be looking at a tax bill of around 7,000.
    • 13Kent
    • By 13Kent 17th May 19, 12:58 PM
    • 1,066 Posts
    • 4,068 Thanks
    13Kent
    • #5
    • 17th May 19, 12:58 PM
    • #5
    • 17th May 19, 12:58 PM
    Thank you, looks like it would be better to sell now then.

    • silvercar
    • By silvercar 17th May 19, 4:40 PM
    • 38,992 Posts
    • 162,536 Thanks
    silvercar
    • #6
    • 17th May 19, 4:40 PM
    • #6
    • 17th May 19, 4:40 PM
    Thank you, looks like it would be better to sell now then.
    Originally posted by 13Kent
    I'm sure there are other considerations. Don't make such a major decision just to avoid 7k of tax, maybe the income would be useful to you in the future?
    • 00ec25
    • By 00ec25 17th May 19, 7:11 PM
    • 8,018 Posts
    • 7,749 Thanks
    00ec25
    • #7
    • 17th May 19, 7:11 PM
    • #7
    • 17th May 19, 7:11 PM
    Then deduct any personal allowance you haven't used. careful, that can be read incorrectly The remaining amount will be taxed at 18%. (a very small amount may be at 28% but the 20/21 values haven't been announced yet, so I wouldn't worry).
    Originally posted by silvercar
    to avoid confusion, he does not mean you reduce the gain by any remaining income tax personal allowance

    what he really means is if you have unused income tax personal allowance then that means you have more of the gain taxed at 18% not 28% since more of the gain is covered by the 18% band

    if you want to see a detailed explanation of the CGT calculation up to April 2020 then please read this:

    https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2
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