A capital gains tax property sale question
Discussion
bennno said:
Surely you already offset the mortgage interest against the rental income received each year from 1994 through to 2021?
Plus if you owned from 94 to 23 and lived in it for 10 of those 29 years, youd get relief against approx 10/29th's of the capital gain.
Do you have an accountant?
Not any more, having sold business and retired in 2019. Am just about to take financial advice on pension, I may be able to use them.Plus if you owned from 94 to 23 and lived in it for 10 of those 29 years, youd get relief against approx 10/29th's of the capital gain.
Do you have an accountant?
Edited by bennno on Wednesday 22 March 10:21
heebeegeetee said:
bennno said:
Surely you already offset the mortgage interest against the rental income received each year from 1994 through to 2021?
Plus if you owned from 94 to 23 and lived in it for 10 of those 29 years, youd get relief against approx 10/29th's of the capital gain.
Do you have an accountant?
Not any more, having sold business and retired in 2019. Am just about to take financial advice on pension, I may be able to use them.Plus if you owned from 94 to 23 and lived in it for 10 of those 29 years, youd get relief against approx 10/29th's of the capital gain.
Do you have an accountant?
Edited by bennno on Wednesday 22 March 10:21
You should take advice from an accountant as you will need to prepare a car return and will get relief for the years you lived in the apartment, plus your costs of purchase and costs of sale.
bennno said:
heebeegeetee said:
bennno said:
Surely you already offset the mortgage interest against the rental income received each year from 1994 through to 2021?
Plus if you owned from 94 to 23 and lived in it for 10 of those 29 years, youd get relief against approx 10/29th's of the capital gain.
Do you have an accountant?
Not any more, having sold business and retired in 2019. Am just about to take financial advice on pension, I may be able to use them.Plus if you owned from 94 to 23 and lived in it for 10 of those 29 years, youd get relief against approx 10/29th's of the capital gain.
Do you have an accountant?
Edited by bennno on Wednesday 22 March 10:21
You should take advice from an accountant as you will need to prepare a cgt return and will get relief for the years you lived in the apartment, plus your costs of purchase and costs of sale.
zbc said:
Sorry I was suggesting that you make it your main residence again. Like I said you would have to be serious. Move back in, start renting out your current main residence, live there I would suggest at least a couple of years and then sell it. Any suggestion that you are doing it to avoid tax would invite HMRC attention of course but if you have a legitimate reason, such as a new job then I don't see the issue. Of course, having spent the past 10 years living in your typical PH mansion you may not see the attraction of moving back into your student flat but then you just have to pay up like I've just had too.
If you genuinely move back in AND it really becomes your main residence again, then you include the second period of occupancy when you are working out the total number of days it was your main residence.For a property to become your main residence however, just moving in may not be enough to establish that fact.
Eric Mc said:
zbc said:
Sorry I was suggesting that you make it your main residence again. Like I said you would have to be serious. Move back in, start renting out your current main residence, live there I would suggest at least a couple of years and then sell it. Any suggestion that you are doing it to avoid tax would invite HMRC attention of course but if you have a legitimate reason, such as a new job then I don't see the issue. Of course, having spent the past 10 years living in your typical PH mansion you may not see the attraction of moving back into your student flat but then you just have to pay up like I've just had too.
If you genuinely move back in AND it really becomes your main residence again, then you include the second period of occupancy when you are working out the total number of days it was your main residence.For a property to become your main residence however, just moving in may not be enough to establish that fact.
Politically I come from the point of view that the government spends far too much and taxes far too much:
Interesting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
Interesting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
Hammersia said:
Politically I come from the point of view that the government spends far too much and taxes far too much:
Interesting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
3% ROI on what the rental income? what about the capital growth? if you have a £40k tax bill then that going to be about £140k GrowthInteresting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
1 family renting houses 1x family as does 1x family owning a home thus its a 0 gain or loss of a property.
superlightr said:
Hammersia said:
Politically I come from the point of view that the government spends far too much and taxes far too much:
Interesting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
3% ROI on what the rental income? what about the capital growth? if you have a £40k tax bill then that going to be about £140k GrowthInteresting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
1 family renting houses 1x family as does 1x family owning a home thus its a 0 gain or loss of a property.
Hence a family can't buy it. They can rent it, but we're usually told that's a bad thing. I believe government actions disincentivise socially beneficial activities.
Alpinestars said:
zbc said:
If you move back into the flat and live there for a while you could avoid all CGT. Beware though as this has to be geniune. This can also be checked.
That’s not right. I didn't say it was a good idea!
zbc said:
Alpinestars said:
zbc said:
If you move back into the flat and live there for a while you could avoid all CGT. Beware though as this has to be geniune. This can also be checked.
That’s not right. I didn't say it was a good idea!
Alpinestars said:
That’s still not right. How can a residence that was not your primary residence, become your primary residence for the whole period of ownership just because you go back to live there for 2 years? In OP’s case, the period of absence is nearly 30 years. How does that become exempt?
You're right it isn't, certainly not in the OP's case and in fact only in some very specific situations. Like I said not a good ides.As Alpine says, you will only ever get Main Residence exempton for the period the property has been your main residence (plus the freebie 9 months).
So, you CAN return to a property that has not been your main residence for a long time and, if you jump through all the right hoops, can have that property re-designated your main resience. But the main residence exemption will NOT cover all that time the property was NOT your main residence.
So, you CAN return to a property that has not been your main residence for a long time and, if you jump through all the right hoops, can have that property re-designated your main resience. But the main residence exemption will NOT cover all that time the property was NOT your main residence.
Eric Mc said:
As Alpine says, you will only ever get Main Residence exempton for the period the property has been your main residence (plus the freebie 9 months).
So, you CAN return to a property that has not been your main residence for a long time and, if you jump through all the right hoops, can have that property re-designated your main resience. But the main residence exemption will NOT cover all that time the property was NOT your main residence.
This ^^. And all the meanwhile youre living back in the old flat your actual main home will then not be classed as your main residence so it will begin a period of cgt accrual until such time as you move back in. Presumably your actual main home is worth more than the old flat in which case you’re going to loose more in cgt than you gain overall.So, you CAN return to a property that has not been your main residence for a long time and, if you jump through all the right hoops, can have that property re-designated your main resience. But the main residence exemption will NOT cover all that time the property was NOT your main residence.
Theres nothing you can do to avoid cgt, jist ensure you are tax effecient overall and declare all your legitimate expenses to offset it.
zbc said:
heebeegeetee said:
Many thanks for the replies guys, I wasn't aware of the online calculator.
I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
If you move back into the flat and live there for a while you could avoid all CGT. Beware though as this has to be geniune. This can also be checked.I think we're going to be in for some tax, due to buying a property in 1984 and selling in 2023.
I understand I can't include mortgage payments, which annoys me because obviously that's what we actually paid. If I'm taxed on the purchase price then I'm paying tax on money I never had.
Is there any strategies I can use? Can I offshore it?
Forgive the basic questions guys, this is new territory for us.
The planning tip is to take up residence in the old flat. There’s no test of how long, but as long as it’s your main residence, you’ll get an extra 3 years’ relief - total relief being the period of actual residence (original 10 years, plus 3 years, plus 9 months, plus the final residence period). You’ll lose the final residence period for your current property, but you’ll gain that back with the 3 year exemption.
Win win.
Win win.
Hammersia said:
Yes, I have made capital growth, not saying otherwise. I am saying that in spite of it now making no sense as an investment for income purposes, it is not worth me selling purely due to the tax bill it would incur.
I don't understand this mindset at all. Maybe you should have invested in a depreciating asset instead?superlightr said:
Hammersia said:
Politically I come from the point of view that the government spends far too much and taxes far too much:
Interesting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
3% ROI on what the rental income? what about the capital growth? if you have a £40k tax bill then that going to be about £140k GrowthInteresting sort of thread, the OP's situation isn't unusual -
I'm one of the 2 million accidental landlords, 1 small property from a time when houses were cheap. The ROI is very poor, probably 3%. However it's all been paid for originally out of taxed income, and now I pay income tax on the rental money.
If I were to sell I would pay capital gains of around £40,000. Hence I won't sell. The country is we're told, short of houses. QED.
Even over longer periods its possible a capital gain is in fact a loss when taking account of inflation but you still pay tax.
(Example simplified).
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