Tax advice on soon to be LTB which is my home

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    Tax advice on soon to be LTB which is my home

    Hi all

    I am trying to buy another property with my partner to move in and be our main residence and have decided to rent mine with a LTB mortgage to raise the £ needed.

    It is more attatchment to my home which I have owned for 11 years and lived in for most of that time after a complete renovation. The plan then is to, probably, sell it soonish, flexible on this.

    I then read about CGT if you sell a rental property, with special rules if you have lived in it, but cannot seem to find the anything about these specials rules!

    When I say flexible, it could just be for a 6 month rental then sell, or more, depeding how best to go with this tax thing!

    Many thanks for any help


    #2
    The gain is calculated over the period during which you own the property, and then apportioned between the time you lived in it (plus 9 months - assuming you sell after this April) which is not taxable and the time you let it, which is.

    If you buy another property while owning this one, you will pay an additional amount of SDLT - which you can reclaim if you sell within a short period.

    Taking out a mortgage for 6 months is not usually a great idea, the mortgage fees tend to make that quite expensive.
    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


      #3
      Ok great thanks.

      I actually called the tax office today and luckily got a really helpful woman.

      She pretty much said that and if you went into the time tax was to be paid it was done in fractions or something.

      Yes I agree, this is me covering all my options. I suppose there is a way to calculate where the amount of tax outweighs the early repayment charge and vice versa?

      If I disregard anything I've spent on my home I think the gain would be about £250k as a rough idea, if anyone could explain or help me work this out for tax I would be liable for?

      Great site by the way!

      Comment


        #4
        Any help on this please?

        Is a way to calculate where the amount of tax outweighs the early repayment charge and vice versa?

        Comment


          #5
          I may have worked this out actually, or be completely wrong!

          Lets say the house is worth £250k more now than when I bought it.

          Lived in it 11 years, I then rent it out for 2 years.

          £250k x 11 divide by 2 (ignore the nine months to keep simple) is 45k ish?

          Using tax scouts CGT calculator is says £6500.00?

          Is this roughly correct?

          The ERC on the mortgage is about 12k for the first year!

          Many thanks for any guidance

          Comment


            #6
            Assuming when you sell it it's worth £250,000 (it doesn't matter what it's worth now)...

            It's (£250,000 /13) times 2, not divide.
            But you get the extra 9 months, so it's basically times 1.25

            Which is £24000 of taxable gain.
            Less your personal allowance of £12000 leaving a gain of £12000.
            So tax would be about 2160 or 3360 depending on whether you're a standard rate or higher rate tax payer.
            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
              That is really help, I really appreicate that.

              Does the 9 months start from the day the mortgage changes to BTL or from the day the tenancy starts?

              I have worked this using you figures and tax scouts CGT and rental income calculators.

              As the ERC on the mortgage is 12k after one year and about 5k after five years it seems including the CGT needed to pay and how much rental income would accumulate, it would be sensible to sell in year 3, 4 or 5 really?

              Comment


                #8
                The 9 months is added on to the period when the property was let.
                That period begins on the first day of the first tenancy.

                The mortgage doesn't have any effect on CGT.
                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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