Capital gains advice

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    Capital gains advice

    I was hoping someone could advise me on the following

    I bought a house in 2000 for £120,000. I lived in this until March 2014, when it was valued at £250,000. I remortgaged on an interest only buy to let on this property for £180,000, which I used with a new mortgage of £130,000 to buy my current home.
    I have since rented out first house, and the monthly return is enough to pay insurance and mortgage, +£150 extra.
    My question is, I am now getting married, and the plan is to sell first house in March 2017., and use this money to help pay my existing mortgage.
    What capital gains tax will I need to pay on? What can I do to help reduce costs?
    Any help greatly appreciated

    #2
    You are exempt for capital gains tax on the period under owner occupation + a further 18 months after departure,

    So you should have no capital gains tax up to 31 Sept 2015. Why do you need to sell in March 2017 ?

    Comment


      #3
      Plus Letting Relief.

      Have you read HMRC's Help Sheet HS283 on the subject?

      http://www.hmrc.gov.uk/helpsheets/hs283.pdf

      [For disposals after 5 April 2014, the exemption for the last 36months of ownership is reduced to 18 months.]

      Comment


        #4
        Originally posted by Gordon999 View Post
        You are exempt for capital gains tax on the period under owner occupation + a further 18 months after departure,

        So you should have no capital gains tax up to 31 Sept 2015. Why do you need to sell in March 2017 ?

        Thank you for your quick reply, sorry, but work shifts... March 2017 is when the mortgage redemption period is finished, I need to sell the house to try and reduce my current mortgage payments.

        So, only liable for CGT from September 2015?

        Comment


          #5
          You essentially take the sales proceeds and deduct the original purchase price.
          That's the capital gain.
          You then take the total number of days between purchase and sale, and calculate the daily gain.
          You then take the number of days you were resident plus 548 (18 months) from the total number of days and multiply the daily gain by that figure.
          That's the capital gain while the property was in the business.


          If you sell before September you'll pay no CGT - if you wait another 18 months, you'll pay tax on the 18 months gain.
          In your case, you should check to see if the mortgage redemption penalty is going to be more than the tax you might save if you sell sooner.
          It probably won't be, but it's worth a check.
          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


            #6
            Originally posted by Riley20 View Post
            Thank you for your quick reply, sorry, but work shifts... March 2017 is when the mortgage redemption period is finished, I need to sell the house to try and reduce my current mortgage payments.

            So, only liable for CGT from September 2015?

            If you sold in 2017 for say 290K , gaining a profit of 170K over 17 years.

            Then the capital gain from Sept 2015 to Mar 2017 ( 1.5 years ) would amount to only 15K .

            Since you can claim a capital gains personal allowance plus Letting Relief as pointed posted by King_Maker, so I expect no tax bill .

            Comment


              #7
              That's great news, thank you for your help and advice. No tax bill would be great!!!

              Thank you all for your replies, very much appreciated.

              Comment

              Latest Activity

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              • Reply to Caught out by changes to Capital Gains Tax
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              • Reply to Caught out by changes to Capital Gains Tax
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                jpkeates
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              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
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              • Reply to Caught out by changes to Capital Gains Tax
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              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
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              • Reply to Caught out by changes to Capital Gains Tax
                by reluctantlandlord1976
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