Trapped by high gearing and CGTMake Text Bigger
I purchased a 4 bed buy to let property in 2001 for £115,000 and by 2008 it was worth considerably more so I refinanced it to 85% LTV and used the net proceeds to invest into more property. I have never lived in the any of the properties.
The properties I purchased in 2008 initially fell in value and have just about recovered to the price I purchased them at, but not quite.
I have now realised that property investment isn’t for me and I want out. I’m having to subsidise my portfolio to the tune of around £6,000 per annum and that can’t go on.
The loan on the 4 bed house is £195,000 and the value is currently around £240,000.
If I sell it for £240,000 then my capital gain will be £125,000. When added to my income this would put me into the 50% tax bracket so my CGT bill would be approaching £60,000 after using my annual CGT exemption. This is more than the net proceeds of sale.
I have spoken to my accountant and the only thing he could suggest is to go and live in the 4 bed property for a while. However, this would not be practical.
I am also concerned about the prospect of interest rate increases which may have a dampening effect on the recovery to values over the last 18 months or so.
Short of continuing to service the losses of £6,000 per annum for a few more years does anybody have any other suggestions please?
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