Exiting BTL tax questions

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    Exiting BTL tax questions

    I have been doing BTL for a while, just 2 units, so not worth continuing with the Tax and legislative risks. I lived in one too, so best to get out before the CGT relief for that disappears too.

    Both units are recently vacated, but sales will go thru next year, one for various reasons has negligible gain so both in one year is not a problem.


    2018-2019

    I will have to pay managing agents and solicitor fees related to the sale, this I understand comes of CGT. However I am paying council tax, mortgage, utilities and service charges, are they still allowable expenses for income tax?

    2019-2020

    I assume any non-sale related expenses will be unavailable to me to reduce my income tax?


    #2
    I expect for your 2018-2019 tax return ,

    - you will be reporting the "rental income" deduct the allowable expenses to arrive at a rental profit and any loss can be carried forward to the next BTL .

    I expect for your 2019-2020 tax return,

    - you will be reporting Nil rental income and carry forward any loss from last year.

    and you will be reporting the capital gain for which legal and estate agent fees are allowable expenses. Also there is a capital gain personal allowance of £11,xxx which is not taxed.

    Comment


      #3
      Thanks Gordon,

      I was really checking that there are no mirror regulations at the end of letting as those that exclude expenses before the first let. I could understand it, think how messy it would be if you gave up trying to sell and moved into it...

      I suppose I can fill in a tax return each year to pass the losses forward in case BTL ever falls back into favor.


      Comment


        #4
        There's nothing that excludes expenses before the first let.
        They're brought into the business on the date of the first let (unless they're nothing to do with the business - usually because the landlord is resident).
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          jpkeates Not excluded so much as allocated differently. Prior to the first let some things that would be 'revenue' during lettings are classed as 'capital', it is complicated https://www.investorschronicle.co.uk...ses-minefield/

          But does a similar set of rules apply when disposing?


          Comment


            #6
            I'm not sure I would agree with all of the points made in that article.
            In fact, the summary at the bottom (which I do broadly agree with) seems to conflict with a lot of the points in the article itself.

            For example, installing a carbon monoxide detector where there wasn't one before isn't an allowable expense against income, but not because it's a capital item, it's because it's a furnishing bought for the first time.
            Unless the author has some amazing system in mind way beyond what I regard as a carbon monoxide detector.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              It is nearly 20 years since I started, so cannot cite where I got the original info from.

              Answer must be in here:
              https://www.gov.uk/hmrc-internal-man...manual/pim2510

              Comment


                #8
                Its a rabbit hole, but this looks promising
                ITA07/S125 and CTA09/S196-197

                Post-cessation expenses

                In arriving at the tax due on post-cessation receipts the customer can deduct any allowable business losses that were left unrelieved when the business ceased and also other expenses that would have been allowable had the business continued. Thus, for example, if the customer recovers a bad debt after cessation, they can deduct the costs incurred in collecting that debt. Another example might be the cost of background heating for empty premises to keep down condensation and so maintain the value of the property for later sale. Post-cessation expenses but no post-cessation receipts

                Where the customer doesn’t have any post-cessation receipts they may still be able to claim relief sideways for post-cessation bad debts and certain specific defined post-cessation expenses. The sideways deduction is against other taxable income and capital gains of the year in which the debts proved to be bad or the payments were made.

                Comment


                  #9
                  Your business ends when you sell the last property.
                  You have up to six years to claim operational expenses associated with the business, but if you are accounting on a cash basis, there should be none, and, if accounting on an accrual basis any outstanding amounts should be provided for.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment

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