Sell or keep BTL property?
Discussion
So I have a second property that I let out. It was my ex wife's flat that was in negative equity when we married, and I've subsequently dug it out of debt by taking money out of my primary residence and took out a BTL mortgage. ( When wife f!kd off she took cash I kept the property).
I figure it's worth £85k with £53k left on the mortgage. Monthly income is £480 minus 10% fees. I'm a high rate tax payer as well.
As far as I see if I sell it I would be liable for capitol gains tax on my profit? Is this correct?
Edit: it was in her name when we married, we added my name to the deeds. Originally there was a large interest only Northern rock mortgage on it. I had to put in about £30k in order to get it into 30% loan to value range for the BTL mortgage. Not sure if that's relevant.
I figure it's worth £85k with £53k left on the mortgage. Monthly income is £480 minus 10% fees. I'm a high rate tax payer as well.
As far as I see if I sell it I would be liable for capitol gains tax on my profit? Is this correct?
Edit: it was in her name when we married, we added my name to the deeds. Originally there was a large interest only Northern rock mortgage on it. I had to put in about £30k in order to get it into 30% loan to value range for the BTL mortgage. Not sure if that's relevant.
Edited by RichTT on Saturday 30th December 12:31
Yes but there is a £11.3k CGT allowance per tax year so you will only pay CGT on the profit above that - you can also deduct some of the costs when you bought the flat (see your solicitors final statement of the transaction).
That's £11.3k per person so if you own it with someone you can double it if they haven't used it up that year.
6% net yield before tax is pretty good so in that light I would keep it going unless you have a better yield for the cash if you sell. But then again, it depends how much CG you're sitting on. I tend to sell property exactly when the crystallised profit reaches the allowance level (when possible).
That's £11.3k per person so if you own it with someone you can double it if they haven't used it up that year.
6% net yield before tax is pretty good so in that light I would keep it going unless you have a better yield for the cash if you sell. But then again, it depends how much CG you're sitting on. I tend to sell property exactly when the crystallised profit reaches the allowance level (when possible).
Edited by nickfrog on Saturday 30th December 12:37
https://www.taxinsider.co.uk/1383-Lettings_Relief_...
There's a £40k letting relief if the let property was ever your primary residence.
If it not too much hassle, it could be worth moving into the "2nd" and letting out your "1st" property for a year or so to benefit from the "2nd" property being your primary residence at some point.
You obviously need to sort out your mortgages to allow you to live in your "2nd" property and let out your "1st" property.
There's a £40k letting relief if the let property was ever your primary residence.
If it not too much hassle, it could be worth moving into the "2nd" and letting out your "1st" property for a year or so to benefit from the "2nd" property being your primary residence at some point.
You obviously need to sort out your mortgages to allow you to live in your "2nd" property and let out your "1st" property.
Yes I'm aware of the changes coming in which is why I'm thinking about selling up. I really doubt it's appreciating much value wise. I do have the option of selling privately thankfully which should save some money.
Really going to resent paying so much tax to release the equity though. It's been such a waste of money and looks like it's going to cost me more than I've put into it.
Edit. Lord no I wouldn't move into it.
Really going to resent paying so much tax to release the equity though. It's been such a waste of money and looks like it's going to cost me more than I've put into it.
Edit. Lord no I wouldn't move into it.
Edited by RichTT on Saturday 30th December 15:47
Edited by RichTT on Saturday 30th December 15:48
Can the tax bods tell us what is the 'tax basis' for CGT in this situation? Is is the original purchase price or the valuation when the property changed hands at the time of either marriage or divorce?
What I am getting at is that if the property was in neg equity then surely it follows that the value today is less than the original purchase price? Unless you had one of the Northern Rock 125% LTV special mortgages!
So what capital gains do you actually have? The fact you paid down the mortgage principal by £30k shouldn't affect this calculation AFAIK - sounds like there is actually no CGT-able profit in this situation.
What I am getting at is that if the property was in neg equity then surely it follows that the value today is less than the original purchase price? Unless you had one of the Northern Rock 125% LTV special mortgages!
So what capital gains do you actually have? The fact you paid down the mortgage principal by £30k shouldn't affect this calculation AFAIK - sounds like there is actually no CGT-able profit in this situation.
Depends what the relationship was when the transfer took place. If transferred when married, it would be the original valuation. If transferred sometime after separation, it could potentially be the market value at the time.
https://www.gov.uk/government/publications/husband...
https://www.gov.uk/government/publications/husband...
NickCQ said:
Can the tax bods tell us what is the 'tax basis' for CGT in this situation? Is is the original purchase price or the valuation when the property changed hands at the time of either marriage or divorce?
What I am getting at is that if the property was in neg equity then surely it follows that the value today is less than the original purchase price? Unless you had one of the Northern Rock 125% LTV special mortgages!
So what capital gains do you actually have? The fact you paid down the mortgage principal by £30k shouldn't affect this calculation AFAIK - sounds like there is actually no CGT-able profit in this situation.
Yes it was one of those bloody ridiculous mortgages. Bought long before I had any involvement with her. It's been a toxic thorn in my side for many years. So has the flat. (Boom boom)What I am getting at is that if the property was in neg equity then surely it follows that the value today is less than the original purchase price? Unless you had one of the Northern Rock 125% LTV special mortgages!
So what capital gains do you actually have? The fact you paid down the mortgage principal by £30k shouldn't affect this calculation AFAIK - sounds like there is actually no CGT-able profit in this situation.
Does it go on profit over original valuation?
NickCQ said:
Unless you had one of the Northern Rock 125% LTV special mortgages!
There was never any such thing as a 125% mortgage.................it was a 95% mortgage and a 30% unsecured loan on the same rate and term as the secured mortgage..........so the property would not have been in negative equity from the start.............Sarnie said:
NickCQ said:
Unless you had one of the Northern Rock 125% LTV special mortgages!
There was never any such thing as a 125% mortgage.................it was a 95% mortgage and a 30% unsecured loan on the same rate and term as the secured mortgage..........so the property would not have been in negative equity from the start.............
NickCQ said:
Sarnie said:
NickCQ said:
Unless you had one of the Northern Rock 125% LTV special mortgages!
There was never any such thing as a 125% mortgage.................it was a 95% mortgage and a 30% unsecured loan on the same rate and term as the secured mortgage..........so the property would not have been in negative equity from the start.............One of life's dodges bullets... luckily we had a scrap of sense about us when we declined it.
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