Capital gains tax selling a buy to let

[Retd]

I own a house which I currently let out.

I'd like to sell the house to the sitting tenant (at a discount, if that makes any difference) and buy another.

Will I have to pat capital gains tax on the profit that I've made selling my current place even though I'm buying anoher straight away?


Thanks for your help

[Caddyshack]

Retd said:

I own a house which I currently let out.

I'd like to sell the house to the sitting tenant (at a discount, if that makes any difference) and buy another.

Will I have to pat capital gains tax on the profit that I've made selling my current place even though I'm buying anoher straight away?


Thanks for your help

Yes, you pay it when you realise the gain. There isn’t any rollover relief to buy the next property.

[Retd]

Caddyshack said:

Yes, you pay it when you realise the gain. There isn’t any rollover relief to buy the next property.

Thanks for the quick reply. I guess that plan bites the dust

[Panamax]

Retd said:

Thanks for the quick reply. I guess that plan bites the dust.

Bizarre. There's simply not enough information here to come to that conclusion.

[Retd]

Panamax said:

Bizarre. There's simply not enough information here to come to that conclusion.

I've no idea why you think that's the case.

I know what the house is worth; my equity and therefore how much capital gains I'd have to pay.

The equity is substantial, I've owned the house for many years so selling will mean me giving upwards of 20% of its worth to the government. I'd also have to pay 3% stamp duty on purchasing a replacement.

I'd like to help the tenant out, but it's too expensive.

Am I missing something?

[98elise]

Caddyshack said:

Retd said:

I own a house which I currently let out.

I'd like to sell the house to the sitting tenant (at a discount, if that makes any difference) and buy another.

Will I have to pat capital gains tax on the profit that I've made selling my current place even though I'm buying anoher straight away?


Thanks for your help

Yes, you pay it when you realise the gain. There isn’t any rollover relief to buy the next property.

It's a shame they don't as selling to a long term tenant should be encouraged.

[Retd]

98elise said:

It's a shame they don't as selling to a long term tenant should be encouraged.

I agree. The tenant has come into a little money - enough for a deposit.
The house is well suited to him - close to family and medical care that he needs intermittently.

It's a long time since I lived there, so I no longer have any emotional attachment, but it is a big part of my 'pension' and I can't afford to just hand 25% of that to the govt.

Sadly, everyone's a loser.

[hellorent]

Caddyshack said:

Yes, you pay it when you realise the gain. There isn’t any rollover relief to buy the next property.

Are you sure, my accountant advised me a while ago if I sell 1 of my BTL's and buy another with the sale proceeds
the would be no CG to pay.

[MaxFromage]

Retd said:

Am I missing something?

It appears you lived there at some point? The gain is reduced for any period the home was your principal private residence. Also any capital improvements can reduce the gain.

[MaxFromage]

hellorent said:

Are you sure, my accountant advised me a while ago if I sell 1 of my BTL's and buy another with the sale proceeds
the would be no CG to pay.

I'm afraid that was poor advice. You can't rollover on a BTL. Unless you mean a furnished holiday let, which you can, but currently that is due to end in April 2025.

[Eric Mc]

CGT is complex with different rules, rates and allowances for different classes of assets.

And these rules are always changing.

[98elise]

Retd said:

98elise said:

It's a shame they don't as selling to a long term tenant should be encouraged.

I agree. The tenant has come into a little money - enough for a deposit.
The house is well suited to him - close to family and medical care that he needs intermittently.

It's a long time since I lived there, so I no longer have any emotional attachment, but it is a big part of my 'pension' and I can't afford to just hand 25% of that to the govt.

Sadly, everyone's a loser.

The lack of emotional attachment is why it would be good for tenants.

To me as a Landlord its just bricks and mortar, but to a tenant it's their home so they may not want to move house.

I'd happily sell to my tenants if I could just roll it into another rental.

Edited by 98elise on Friday 29th March 15:14

[Panamax]

Retd said:

Am I missing something?

You mentioned selling at a discount but didn't say whether that discount might eliminate your gain.

There's nothing to prevent you selling below market value, so long as the transaction isn't artificially moving value around. For instance, if the discount is a disguised gift it should still be taxable. If the discount survives any HMRC scrutiny the buyer's base value for CGT will be what they paid for the property, not its market value at time of purchase.

[CoolHands]

You could say you’re a Labour mp and everything would be fine?

[macron]

Panamax said:

You mentioned selling at a discount but didn't say whether that discount might eliminate your gain.

There's nothing to prevent you selling below market value, so long as the transaction isn't artificially moving value around. For instance, if the discount is a disguised gift it should still be taxable. If the discount survives any HMRC scrutiny the buyer's base value for CGT will be what they paid for the property, not its market value at time of purchase.

Come off it, we'll be talking a tickle to avoid estate agent fees.

Not sure why the OP says everyone loses. The OP has a massive gain. Surely that was the whole point of keeping it and renting it out? It amazes me how many people have massive gains then get pissed they might have to pay tax. How exactly did anyone think it worked?! It's a gain! If you didn't want a huge one you should have sold it years ago!

[Retd]

macron said:

Come off it, we'll be talking a tickle to avoid estate agent fees.

Not sure why the OP says everyone loses. The OP has a massive gain. Surely that was the whole point of keeping it and renting it out? It amazes me how many people have massive gains then get pissed they might have to pay tax. How exactly did anyone think it worked?! It's a gain! If you didn't want a huge one you should have sold it years ago!

Macron: I think that you're really missing the point.

I'm not at all worried about paying tax when I eventually sell.
What I meant by 'everyone loses' is that my tenant loses because he would like to buy my place but it'll cost me too much to sell the place to him and I lose because I'd like to do a favour for someone that I consider a friend,

There was no intent to avoid tax. I was simply asking when I'd have to pay it. As hellorent said above, If I sell a BTL just to buy another then there hasn't really been a gain. It seems that that's not the case.

And .. I have no idea where you got ' tickle to avoid estate agent fees' from. FWIW, it was a sizeable discount to help someone who'd been a good tenant for a number of years.

[macron]

Well you're an incredibly generous person considering a far bigger discount than you would have to if you simply openly marketed it- fair play to you!

[wisbech]

Retd said:

There was no intent to avoid tax. I was simply asking when I'd have to pay it. As hellorent said above, If I sell a BTL just to buy another then there hasn't really been a gain. It seems that that's not the case.

Of course there has been a gain. Say that you were trading cars, buy a Mini at 10k and sell for 15, then buy a Golf for stock at 15. You could never argue that you made no profit on the Mini because you bought another car.

[leef44]

wisbech said:

Retd said:

There was no intent to avoid tax. I was simply asking when I'd have to pay it. As hellorent said above, If I sell a BTL just to buy another then there hasn't really been a gain. It seems that that's not the case.

Of course there has been a gain. Say that you were trading cars, buy a Mini at 10k and sell for 15, then buy a Golf for stock at 15. You could never argue that you made no profit on the Mini because you bought another car.

His point is more about that he is only considering selling to do a friend a favour which he would then like to reinvest that money in another property so that he is back to the same investment. At some point in the future, he would cash out and then happily pay tax on the gain.

So while he is not cashing out for good but reinvesting, it would make sense that there was rollover relief which is not available for btl.

[md_ph]

If you think about it you will have to pay the tax at some stage so you are not in any worse off position overall if you sell now vs sell in years to come.

Initially you will take a hit on the equity that you have but it means that when you come to sell your newly purchased flat when you want to release the funds for your pension you will have less gain to pay in the future as the differences in the buy vs sell price will not be as great as the original flat.