How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3117
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Im thinking about selling my flat that I rent out. Do I pay

Resolved Question:

I'm thinking about selling my flat that I rent out. Do I pay capital gains tax on the profit (about £30k) if I use it to pay into the mortgage on my home?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.

Capital Gains Tax (CGT) and mortgages don't mix! You are renting out so the interest element of the mortgage only offsets the rent and reduces it for Income Tax purposes.

You are entitled to Lettings Relief (LR) under CGT rules. This is the lesser of 40K, Private Residence Relief [in your case presumably nil as you let out your flat and didn't live there], or the capital gain [in your case 30K]. It would appear from the data that you have given me in your question that you will escape CGT altogether on this sale as the LR will eliminate any liability.

What you do with the moneys you receive viz a viz the mortgage is irrelevant to the CGT position. Might well interest your lender though!
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3117
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  TonyTax replied 2 years ago.

I have a different answer.

 

Repaying part of the mortgage on the home you live in will have no effect on the calculation of your taxable gain, if there is one. Letting relief is only available if the property has been both your main home at some point and let at some point.

 

If you exchange contracts to sell the property by 5 April 2014, the gain for the period the property was your main home will be exempt from CGT as will the gain for the last 36 months of ownership or that much of the last 36 months of ownership when you were not living there, whichever is less.

 

If you exchange contracts to sell the property after 5 April 2014, the gain for the period the property was your main home will be exempt from CGT as will the gain for the last 18 months of ownership or that much of the last 18 months of ownership when you were not living there, whichever is less.

 

If the property has been both your main home and let you will be entitled to letting relief which will be the lesser of:

 

1 £40,000,

 

2 the sum of the gain for the period you lived in the property and the gain for the last 36 (18) months of ownership of the property, excluding overlaps and

 

3 that part of the letting period gain not covered by the last 36 (18) months of ownership.

 

Take a look at the HMRC helpsheet HS283 for more information on the main home and CGT.

 

I hope this helps but let me know if you have any further questions.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.com/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.com/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.com/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions