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TaxRobin
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I am 60 and recently had a heart attack. It is unlikely that

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I am 60 and recently had a heart attack. It is unlikely that I will be able to return to f/t work (I worked in the city for a bank). To try and survive until I reach retirement in 5 years time, I am looking at drawing down some equity in my home, renting this out and using the drawn down equity to purchase a second property. The joint income for the rental of the two properties, (less interest, service/management fees) should provide me with an approx. income of between £600 and £800 pcm (less any maintenance work that should arise), which I am hoping will at least provide the rental for me to find somewhere to live, whilst I find p/t work to pay for utility bills/living expenses, etc. This is a 5 year plan, after which I will be repaying back the interest and selling both properties in the hope that I will have built enough equity to buy a small apartment outright on my retirement. Can you advise whether I will be liable to pay any CGT either on the rental income or on the sale of the properties in 5 years time. Many thanks.
Submitted: 2 years ago.
Category: Tax
Expert:  TaxRobin replied 2 years ago.
Hello,
You should inform HMRC of your property income no matter whether you are making a profit or a loss from the property. But you pay tax only on your net rental profits – that is, your rental income, less the allowable expenses (deductions) of letting. So if you have no profit, you will have no tax to pay.
You can deduct certain expenses from the total rental income. Some of expenses that you can deduct from the rent that you get are:
the cost of decoration and repairs (but not improvements to the property, such as extensions)
any rent or ground rent that you have to pay
fees you pay to a managing agent
legal fees on renewing short leases (but not when they are first made)
interest you may pay on a loan obtained for the purchase of the property (i.e. a mortgage)
other interest directly related to the business may be allowed
cost of gas safety certificates or similar requirements
insurance
any costs that the tenant would normally pay, but which have actually been borne by the landlord

Types of property liable to Capital Gains Tax include a second home and property that you've rented out.
You would not be allowed personal residence relief if you let the entire home and sell after 5 years. You may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
£40,000
the amount of Private Residence Relief due
the amount of gain you've made on the let part of the property
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Experience: International tax
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