Sell up or rent out?
Discussion
gibbon said:
If you read above, you will see I have, unless I've missed something else. £40k per person no? Just making sure im not missing a trick.
Ah, apologies - yes £40k per person - looks like you have all reliefs covered.Edited by gibbon on Friday 11th July 13:57
Convert it to a commercial premises then stick it in your SIPP ??
If there is still a tax liability then you've done very well
IanA2 said:
From our point of view lettings relief is not relevant as we will not be letting. I'm just worried a little in case the property takes too long to sell. Then we will be stuffed.
When you say "stuffed" you only have to pay CGT pro-rata for the period beyond 18mths after you leave the property - although I appreciate that if the property has rocketed in value since you bought it then that could still be a chunky tax-bill.I don't know how dodgy it would be, but couldn't you still nominate the old house as your principal residence?
IanA2 said:
From our point of view lettings relief is not relevant as we will not be letting. I'm just worried a little in case the property takes too long to sell. Then we will be stuffed.
How much do you anticipate it increasing in value in the time it takes to let (minus the 18 months gratis you get)?Unless it's London or the immediate surrounding areas, it's unlikely to increase much, and that can of course be mitigated by you not increasing the selling price from the day you put it on sale/move out.
Super Slo Mo said:
How much do you anticipate it increasing in value in the time it takes to let (minus the 18 months gratis you get)?
I don't think that's how it works - it's based on the increase from when the property was acquired to when it's sold, minus various allowances and reliefs. This leaves a capital gain amount. You then pay tax on that amount on a on a pro-rata basis for the time beyond 18mths.If the property was expensive and had increased in value dramatically, then the bill could be quickly become pretty hefty.
Sheepshanks said:
Super Slo Mo said:
How much do you anticipate it increasing in value in the time it takes to let (minus the 18 months gratis you get)?
I don't think that's how it works - it's based on the increase from when the property was acquired to when it's sold, minus various allowances and reliefs. This leaves a capital gain amount. You then pay tax on that amount on a on a pro-rata basis for the time beyond 18mths.If the property was expensive and had increased in value dramatically, then the bill could be quickly become pretty hefty.
Seems a little unfair really. It seems that I potentially fall into the category of getting stung for CGT when I sell my rental place (was my home for 10 years, rented for last 2), but then the purchase cost, extension costs and the £40 k allowance might just balance it all out.
Taxes are rarely fair. Ironically the major part of the increase in value has been because of the huge amount spent improving it, not because of market rise which in our area has not been huge. And of course that money had already been heavily taxed.
But hey ho... I suppose the gravy train has to be oiled.
But hey ho... I suppose the gravy train has to be oiled.
I tried to make this a poll but it didnt work, just out of interest which way would people go?
Only thing im struggling with is why borrow more against the btl property when the interest rates are higher?
Likely scenario is that we put down a 15% depostit on the new property which will be raised by the btl mortgage.
Only thing im struggling with is why borrow more against the btl property when the interest rates are higher?
Likely scenario is that we put down a 15% depostit on the new property which will be raised by the btl mortgage.
ch427 said:
I tried to make this a poll but it didnt work, just out of interest which way would people go?
Only thing im struggling with is why borrow more against the btl property when the interest rates are higher?
Likely scenario is that we put down a 15% depostit on the new property which will be raised by the btl mortgage.
In answer to your question....you max out the BTL lending because it's being repaid by someone else (tenants) to reduce the the monthly payments and interest rate payable by someone else.....the rate is less important when its being paid by you. Also, the biggest debt will be the residential mortgage, therefore getting that on as low a rate as possible is the priority.Only thing im struggling with is why borrow more against the btl property when the interest rates are higher?
Likely scenario is that we put down a 15% depostit on the new property which will be raised by the btl mortgage.
Also, technically, this would be a Let-To-Buy mortgage, not a BTL.
Feel free to drop me a line if you want any help with this
Edited by Sarnie on Friday 11th July 20:12
IanA2 said:
Taxes are rarely fair. Ironically the major part of the increase in value has been because of the huge amount spent improving it, not because of market rise which in our area has not been huge. And of course that money had already been heavily taxed.
But hey ho... I suppose the gravy train has to be oiled.
According to the info I found on the Government website, you can offset the money you spent in renovations against the increase in value, basically adding it to the purchase price. But hey ho... I suppose the gravy train has to be oiled.
Presumably you have to be able to prove it though, which might be a problem in my case as I don't think I kept any receipts.
I rent my previous house.
When I looked into CGT it worked like this;
CGT is due on the difference between price paid to purchase the property minus the price you sell it for.
CGT is only due after a set period of time renting the property. This is calculated by working out the number of days you were resident at the property plus 18 months.
So, if you lived at the property as your registered primary residence for 5 years before renting it out, CGT would be due 6.5 years after you left.
Note that HMRC (bless them) count the time in days and you need to be able to prove your dates to the day.
I'm planning to sell my btl within a year of CGT being due, as the house is now worth about 60k more than I paid for it and I can't be bothered with CGT being a factor in my tax return.
When I looked into CGT it worked like this;
CGT is due on the difference between price paid to purchase the property minus the price you sell it for.
CGT is only due after a set period of time renting the property. This is calculated by working out the number of days you were resident at the property plus 18 months.
So, if you lived at the property as your registered primary residence for 5 years before renting it out, CGT would be due 6.5 years after you left.
Note that HMRC (bless them) count the time in days and you need to be able to prove your dates to the day.
I'm planning to sell my btl within a year of CGT being due, as the house is now worth about 60k more than I paid for it and I can't be bothered with CGT being a factor in my tax return.
Sarnie said:
ch427 said:
I tried to make this a poll but it didnt work, just out of interest which way would people go?
Only thing im struggling with is why borrow more against the btl property when the interest rates are higher?
Likely scenario is that we put down a 15% depostit on the new property which will be raised by the btl mortgage.
In answer to your question....you max out the BTL lending because it's being repaid by someone else (tenants) to reduce the the monthly payments and interest rate payable by you.....the rate is less important when its being paid by you. Also, the biggest debt will be the residential mortgage, therefore getting that on as low a rate as possible is the priority.Only thing im struggling with is why borrow more against the btl property when the interest rates are higher?
Likely scenario is that we put down a 15% depostit on the new property which will be raised by the btl mortgage.
Also, technically, this would be a Let-To-Buy mortgage, not a BTL.
Feel free to drop me a line if you want any help with this
rfisher said:
I rent my previous house.
When I looked into CGT it worked like this;
CGT is due on the difference between price paid to purchase the property minus the price you sell it for.
CGT is only due after a set period of time renting the property. This is calculated by working out the number of days you were resident at the property plus 18 months.
So, if you lived at the property as your registered primary residence for 5 years before renting it out, CGT would be due 6.5 years after you left.
I've never heard that before? I was under the impression that you are simply eligible for capital gains tax on the increase in value that occurs whilst the property is rented, with a period of 'free' growth for the first 18 months.When I looked into CGT it worked like this;
CGT is due on the difference between price paid to purchase the property minus the price you sell it for.
CGT is only due after a set period of time renting the property. This is calculated by working out the number of days you were resident at the property plus 18 months.
So, if you lived at the property as your registered primary residence for 5 years before renting it out, CGT would be due 6.5 years after you left.
Very happy to be corrected though, if you could link to more information, I would be very grateful.
gibbon said:
I've never heard that before? I was under the impression that you are simply eligible for capital gains tax on the increase in value that occurs whilst the property is rented, with a period of 'free' growth for the first 18 months.
Very happy to be corrected though, if you could link to more information, I would be very grateful.
It's effectively the same calculation, the problem being in your example that how can you agree on a value at the time when rental began? The only certainties will be how much you paid for it and how much you sold it for.Very happy to be corrected though, if you could link to more information, I would be very grateful.
Jockman said:
It's effectively the same calculation, the problem being in your example that how can you agree on a value at the time when rental began? The only certainties will be how much you paid for it and how much you sold it for.
So its as I said, you start paying cap gains on the increase seen after 18 months of you leaving the property, so in rfishers example it would be after 6.5 years of ownership (5 years plus 18 months) not 6.5 years after moving out as they state.I believe they average the increase in value out evenly over the period of time of ownership, which could, or could not work in your favour. I was very tempted to sell and buy something else in order to avoid all this and lock in some non taxable profit, but stamp duty and other transaction costs are now so high that is makes it eye watering, plus I know the property I already own inside out.
Right, coming to this late but hasn't all the talk of CGT, letting off relief 
, PPR etc etc missed the point? The key to this is how the OP sees property prices moving. At £600 pm the yield on a £140k property is 5%, ok you can currently get 2 year BTL mortgage deals at slightly less than this but start adding costs such as landlords insurance, gas tests, maintenance - the drains always block around Christmas and even if you are not using an agent so cutting out their commission of around 8% of rent the yield just isn't there to make it worthwhile. Add to that you are paying £7k to get it up to scratch - ie one years rent, this just doesn't make sense (I haven't mentioned empty periods and redecoration between rents), UNLESS, you still see significant future capital appreciation, living in the frozen North I don't really understand what this is 
.
I also need to add to an earlier post by another which suggests you max out the BTL/LTB. The addendum to this post is that interest on the BTL will not be an allowable expense for taxation purposes to the extent that the borrowing has been taken out on the BTL to fund the purchase of a private asset ie your new home. At best you may get relief for interest on any new borrowings taken out up to the value of the original loan when you purchased the first property.
Please take your own professional advice on this, but don't worry just about the tax, your crystal ball on property prices is probably the key.
, PPR etc etc missed the point? The key to this is how the OP sees property prices moving. At £600 pm the yield on a £140k property is 5%, ok you can currently get 2 year BTL mortgage deals at slightly less than this but start adding costs such as landlords insurance, gas tests, maintenance - the drains always block around Christmas and even if you are not using an agent so cutting out their commission of around 8% of rent the yield just isn't there to make it worthwhile. Add to that you are paying £7k to get it up to scratch - ie one years rent, this just doesn't make sense (I haven't mentioned empty periods and redecoration between rents), UNLESS, you still see significant future capital appreciation, living in the frozen North I don't really understand what this is .I also need to add to an earlier post by another which suggests you max out the BTL/LTB. The addendum to this post is that interest on the BTL will not be an allowable expense for taxation purposes to the extent that the borrowing has been taken out on the BTL to fund the purchase of a private asset ie your new home. At best you may get relief for interest on any new borrowings taken out up to the value of the original loan when you purchased the first property.
Please take your own professional advice on this, but don't worry just about the tax, your crystal ball on property prices is probably the key.
Good advice there thanks.
I cant see the house prices rising dramatically, it is a refurbished large 3 bed terraced in south wales.
Its really a long term investment as i have no pension in place, at the age of 41 now i think it may be worth hanging on to for 15-20 years. Its difficult not to think of also just selling up and putting the £100k down now.
I cant see the house prices rising dramatically, it is a refurbished large 3 bed terraced in south wales.
Its really a long term investment as i have no pension in place, at the age of 41 now i think it may be worth hanging on to for 15-20 years. Its difficult not to think of also just selling up and putting the £100k down now.
Edited by ch427 on Tuesday 15th July 08:45
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