Selling BTL - tax?
Discussion
With the government one step away from allowing tenants to live forever in their rented accommodation, it seems it is a good time to bail on our BTL. It was my wife's old flat many years ago.
Value is about £300k with half that in equity.
However, being a second home we may get stung for capital gains tax. What is the best way to sell and reduce the tax penalties on the money?
Value is about £300k with half that in equity.
However, being a second home we may get stung for capital gains tax. What is the best way to sell and reduce the tax penalties on the money?
Undirection said:
With the government one step away from allowing tenants to live forever in their rented accommodation, it seems it is a good time to bail on our BTL. It was my wife's old flat many years ago.
Value is about £300k with half that in equity.
However, being a second home we may get stung for capital gains tax. What is the best way to sell and reduce the tax penalties on the money?
AIUI you can offset any investment in improvements to reduce the capital gain but aside from that you will pay CGT on a percentage of the gain based on how long it was lived in as a percentage of the total time of ownership with an allowance of an additional 9 months.Value is about £300k with half that in equity.
However, being a second home we may get stung for capital gains tax. What is the best way to sell and reduce the tax penalties on the money?
So if you owned it for 10 years and lived in it for 4 years & 3 months, then add 9 months to that & you get 5 years - which is 50% of the time you owned it.
So you pay CGT on 50 % of the gain at either 18% if you are a basic rate tax payer or 28% for higher rate,
Not sure if you can also offset selling costs (estate agent fees etc) but would be surprised if you couldn't
IIRC you also have to pay it within 60 days of the sale.
Basically, the longer you have owned it and not lived in it, the more you get screwed!
robscot said:
No magic tricks as mentioned, and as well as paying more as it is worth more, you have the benefit of it going up in value 
These days CGT is a tax on inflation as much as anything else. Since the abolition of indexation & then taper relief it doesn't pay as well as you might think to hold any assets for the long term.
BoRED S2upid said:
If it’s jointly owned you both have an allowance it’s not a hard calculation.
It's not hard if you - a) know what you are doing
b) have records supporting the figures
c) know what your other income is during the tax year in which the sale was made.
c) can be difficult if the sale takes place early in a tax year and the person selling has factors which causes their other income to be variable or unpredictable.
The actual rate of CGT you pay is not purely down to the profit/gain you make on disposal. You also need to know the total of all your other taxable income in the tax year in which the gain was made. This determines how much of the gain falls into the higher rate of CGT.
This was not a problem when the CGT was returned as part of the Self Assessment tax return. However, gains on the sale of residential property now need to be submitted, and the tax paid, within 60 days of the date of completion - which will mean that you need to estimate other income for the tax year to a greater or lesser extent.
The "60 day" system invariably means that the CGT initially paid is almost never 100% correct. How wrong it is depends on the variability of your other income. You will generally need to submit a Self Assessment tax return after the tax year has ended in order to correct your original "estimated" calculations.
nickfrog said:
All the info is online really. I don't think there is a magical trick to cut down on CGT.
My thoughts too, it sounds fairly simple in terms of what you will be charged, there is a calculator on the HRMC website.https://www.gov.uk/tax-sell-property/work-out-your...
It's not - I can assure you.
Working out the gain is not too difficult - as long as you know what additional costs you can add to the original purchase cost/market value and (more importantly) what additional costs ARE NOT allowable.
The tricky part is calculating the actual Capital Gains Tax liability accurately. It is difficult to do this part way through a tax year for the reasons mentioned in my post above and, in most cases, will need to be corrected once the tax year has ended.
Working out the gain is not too difficult - as long as you know what additional costs you can add to the original purchase cost/market value and (more importantly) what additional costs ARE NOT allowable.
The tricky part is calculating the actual Capital Gains Tax liability accurately. It is difficult to do this part way through a tax year for the reasons mentioned in my post above and, in most cases, will need to be corrected once the tax year has ended.
Calculating the CGT liability is linked fundamentally to your overall Income Tax position for the year.
Therefore, calculating CGT BEFORE you know your true Income Tax position will always mean that the CGT calculation will never be 100% correct and will need further tweaking after the tax year end.
Therefore, calculating CGT BEFORE you know your true Income Tax position will always mean that the CGT calculation will never be 100% correct and will need further tweaking after the tax year end.
Gassing Station | Finance | Top of Page | What's New | My Stuff