Old house – sell or rent? Capital Gains Tax?

by Readers Question

10:40 AM, 17th May 2014
About 7 years ago

Old house – sell or rent? Capital Gains Tax?

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Old house – sell or rent? Capital Gains Tax?

We’ve just moved out of our family home, as was for 14 years, and we’re not sure what to do. Old house - sell or rent - Capital Gains Tax

Details:

  • house purchased in 1999 for £35k now worth about £110k
  • lived in as out main residence till end of April.
  • bought new house in part using a Birmingham Midshires Let To Buy mortgage secured on old house, total released £63k.
  • early repayment probably about £3k
  • management company on estate want £2500 for new garage (as there old and in need of replacement).

So do we cut our losses with BM and get rid, and avoid CGT, or rent it out for 2 years, thus avoiding the early repayment charges and maybe making a small profit due to house price gains, but incurring the wrath of CGT.

Thanks

Logan


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Comments

Mark Alexander

10:45 AM, 17th May 2014
About 7 years ago

Hi Logan

I have some good news for you 🙂

You can keep the property for another three years and sell it without any CGT liability regardless of what happens to the value.

Given that you have lived in in for so long, even if you decide to keep it for a lot longer you still won't pay much CGT after you factor in your annual CGT allowances, PPR relief and Letting Relief. Please see >>> http://www.property118.com/capital-gains-tax-relief-on-a-property-you-have-lived-in/

If you are new to the world of lettings I strongly recommend that you get the property professionally managed. It needn't cost you much either, please see this article which I can assure you is very relevant to your situation even though it may not appear that way at first glance >>> http://www.property118.com/run-property-portfolio/64692/
.

Neil Patterson

11:31 AM, 17th May 2014
About 7 years ago

Hi Logan,

Mark is right, and my advise is if you are unsure why do anything as that way you keep all your options open.

Having options is invaluable as you never know what is round the corner.

Mark Alexander

11:36 AM, 17th May 2014
About 7 years ago

Just one caveat I didn't mention previously and ought to do so before somebody else picks me up on it.

In April 2015 the three year rule will change to 18 months. This will barely make any difference to Logan's situation but is worthy of mention.
.

Jeremy Smith

12:04 PM, 17th May 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "17/05/2014 - 11:36":

I thought the 18 month rule had come in April 2014, since I remember asking about this at the time and thinking we would have to get a move on to beat the completion deadline.
Has it changed ?

Mark Alexander

13:32 PM, 17th May 2014
About 7 years ago

Reply to the comment left by "Jeremy Smith" at "17/05/2014 - 12:04":

My error Jeremy, thanks for correcting me. It was April 2014 the 18 month rule came in. I'd even written about it our Tax section - Doh!
.

Devon Landlord

21:41 PM, 17th May 2014
About 7 years ago

I have a question regarding the current property. Is Logan able to live in a property purchased with a BTL mortgage? Would the lender not have something to say about the possible miss-use of this strategy?

Mark Alexander

22:33 PM, 17th May 2014
About 7 years ago

Reply to the comment left by "Devon Landlord" at "17/05/2014 - 21:41":

It isn't a BTL, it's a LTB, perfectly acceptable strategy with lenders having designed products specifically for this purpose
.

Devon Landlord

9:08 AM, 18th May 2014
About 7 years ago

Quite so Mark. I misread the LTB as BTL. Thanks for the confirmation.

Devon Landlord.

Logan Smith

16:05 PM, 20th May 2014
About 6 years ago

thank you for the replies, especially Mark. we plan to sell after 2 years anyway, so I think even though my wife isn't on the properties register, using just my tax relief's hopefully will get the CGT to zero?

Mark Alexander

16:12 PM, 20th May 2014
About 6 years ago

Reply to the comment left by "Logan Smith" at "20/05/2014 - 16:05":

Hi Logan

You are very welcome.

It is VERY easy to add your wife's name to the deeds on the day of sale anyway if you need to in order to avoid a bit of extra CGT 🙂

If you need help at the time I'll be here.
.


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