Selling one rental property and using all of the proceeds to buy another rental

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  • Selling one rental property and using all of the proceeds to buy another rental

    Hi

    I understand that if you sell a rental property you have to pay CGT.

    I have a ground floor two bed maisonette that I'm considering disposing of, but I want to buy either a two bed house or an upstairs two bed maisonette straight away.

    Is there anyway I can avoid CGT? I'd be reinvesting every single penny.

  • #2
    Originally posted by Claymore View Post
    Hi

    I understand that if you sell a rental property you have to pay CGT.

    I have a ground floor two bed maisonette that I'm considering disposing of, but I want to buy either a two bed house or an upstairs two bed maisonette straight away.

    Is there anyway I can avoid CGT? I'd be reinvesting every single penny.
    You have a £10k-ish annual allowance, and can count various items against CGT I think.

    How much did you spend on improvements?

    http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm#4

    How much is your actual taxable capital gain, bearing in mind that house prices have collapsed in the last 5 years and your profile says you are a newish LL?

    Do you have any tax losses you can offset against the gain?

    ML
    Refer Mad Regulators to Arkell vs Pressdram.

    Comment


    • #3
      Or tax losses you can crystallise by selling shares, for instance.

      Or a wife?

      There is no relief for reinvestment, sorry.

      Comment


      • #4
        Hi

        I bought below market value so I don't have any loses in that area. After accounting for my renovation costs to it, my gross profit would be about £30K. My CGT allowance is around £10K I think, then I could add other tax loss of about £1k. So I guess my CGT bill will be based on about £19K.

        I'm not married at the moment (maybe next year or the year after) - but my husband (I am female) to be is in a higher tax bracket.

        If I sold soonish - and the payment I have to give to Mr HMRC is based on 19K, I'm a lowish earner - so would my figure be 18% of £19k?

        Comment


        • #5
          The taxable gain (the £19k) would be added to your earnings/other income and that might push the rate up to 28% on part of the gain. So it depends on your level of income. For 2012/13 the personal allowance is £8,105 and the basic rate band is £34,370. So, add the taxable gain to your earnings/other income and if it takes you over £42,475 (that’s £8,105 plus £34,370) the excess will be taxed at 28% rather than 18%.

          I don’t suppose you ever lived there did you? That would change things.

          Comment


          • #6
            Originally posted by Mr Green View Post
            The taxable gain (the £19k) would be added to your earnings/other income and that might push the rate up to 28% on part of the gain. So it depends on your level of income. For 2012/13 the personal allowance is £8,105 and the basic rate band is £34,370. So, add the taxable gain to your earnings/other income and if it takes you over £42,475 (that’s £8,105 plus £34,370) the excess will be taxed at 28% rather than 18%.

            I don’t suppose you ever lived there did you? That would change things.
            No, I haven't lived there. I might just come in under the higher tax bracket. Many thanks.

            Comment


            • #7
              Remember your acquisition costs, SDLT ect and your slaes and legal fees are deductible against the gross gain. Regards Peter

              Comment


              • #8
                Originally posted by TaxationPete View Post
                Remember your acquisition costs, SDLT ect and your slaes and legal fees are deductible against the gross gain. Regards Peter
                Thanks Peter.

                Comment


                • #9
                  How long have you held it, and how long has it been let out?

                  Comment


                  • #10
                    Purchased in 2009 and always let out.

                    Comment


                    • #11
                      Fine. I have no further comment.

                      Comment

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