Results 1 to 5 of 5

Thread: buy to let tax

  1. #1

    buy to let tax

    Hi, i've had a property for ?? years, dont really want to sell it, its a hugeish garden apartment in a london ' hot spot' but was thinking of letting it out, and then maybe taking a buy to let mortgage out,oh i'm mortgage free atm the question is when and if i did sell what amount would i be liable
    to pay corpora-ion? tax on? 18 % from the initial purchase amount, or 18% from price at which i took the buy to let mortgage out at ?

  2. #2
    If the property is your only property at the moment, you are living in it and have been generally doing so for ages, and you are UK resident, it is treated as your owner-occupied dwelling, and not subject to Capital Gains Tax if you sell it now.

    If you buy a further property, with or without a mortgage, you can elect within a limited period for one of them to be your owner-occupied house, though the HMRC people will probably not believe you if you saying that a house is owner-occupied if it's let out!!

    You need to talk to a good accountant who can explain the merits or snags of election, tell you the time limits for doing so, and generally keep you making the decisions that reduce your tax rather than aggravating it.

    Note that Capital Gains Tax starts at 18% on any gain that is chargeable and over the current year's exempt amount, but if the gain is big enough, and/or other income is large enough, you can find the liability rising to (for example) 28%. It depends on what other income you have, and how big the gain is.

    Again, I can only point you towards getting professional advice - it will save you money!!

  3. #3
    Whilst you rent the flat out, you will be able to deduct the interest element of the BTL loan from the rental income for the calculation of the income tax due but I don't believe it will have any impact on your tax liability at the point you chose to sell.

    My understanding is that CGT is due on the gain made on any propery other than your main residence - which would suggest the difference between the purchase price + costs, and the sale price less costs.

    If you did initially live in the property before moving into your new one, then there may be some kind of allowance for the change in value whilst it was your main residence but I am speculating a little - I'm sure others on here will know more about this.

  4. #4
    As others have already said, no Capital Gains Tax on Principal Residence but there may be CGT on your investment property. Again, to repeat, your mortgage on the investment property will have no effect on the potential CGT, but it can be offset against the rental income for Income Tax purposes.

    However -

    "Note that Capital Gains Tax starts at 18% on any gain that is chargeable and over the current year's exempt amount, but if the gain is big enough, and/or other income is large enough, you can find the liability rising to (for example) 28%. It depends on what other income you have, and how big the gain is".

    - not quite. Capital Gains Tax is charged on any gain above the annual exempt amount (currently 10,600). The 18% rate only applies to the total of chargeable gains AND ALL OTHER TAXABLE INCOME up to 34,370. Thereafter, it is 28%. Thus, if you are already paying higher rate income tax, or have income using up most of your Basic Rate income tax band, you will most likely be charged the higher rate of CGT.

  5. #5
    Better expressed by jeffian than by me!

    That's the problem with reading the forum too late at night.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •