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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13885
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Regarding CGT - I am purchasing a new build property (moving

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Regarding CGT - I am purchasing a new build property (moving in Feb/Mar next year when built) and have offers of a residential mortgage on the new property and the balance on a Let2buy mortgage offer on my current property, which is mortgage free (having paid it off this year and lived in it for the past 25 years). On expected completion in Feb'16, either Ill a) rent it out for a couple of years and maybe sell it then, or I won't let out the house to a tenant and just sell the house within 2016 (if I cant sell it before Feb 16). How much CGT would I pay in the 2 courses of action. ? Purchase price in 1990 was 55k expected sale price currently of 285k. I pay higher rate of tax and my wife lower rate of tax. Happy to talk through...if more details needed
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.I am not sure what you mean when you state the current property is mortgage e free when you advise you have the balance of a Let to Buy mortgage offer - do you mean you will retain the current property and release its equity to make this new purchase? I can advise however you you let the current property out - and this goes on for more than 18 month after it has ceased to be your main residence, then you will have capital gains to pay - so if we work on the premise of two years and the property does not increase in value between now and then - £285K less £55K = £230, 000 gain of which 27.5 of the 28 years will be exempt from capital gains as the time you lived there plus the last 18 months of ownership are exempt under the private residence relief rules - so £225,892 is exempt which leaves £4108 as a liable gain.But as the annual exemption is £11,100 (at this time) then whetehr this property is in your sole name of joint names with your wife - there is no capital gain arising (also you would be due the costs to buy and sell, such as legal fees, and the costs of any capital improvements) If, you then sell almost straight away then there is no capital; gain as sold within 18 months of it ceasing to be your main residence. Just be mindful of the fact that if you rent the property out then the rental income has to be declared to HMRC Let me know if I can be of any further assistance Thanks Sam
Customer: replied 1 year ago.
Hi Sam, to clarify - we needed the Let-to-Buy (on our existing property) along with the other residential mortgage (on the new build property) in "agreement" (good for 6 months) at this stage to show how we would fund the new home being built for occupation in Feb '16.
Our home (now) has just gone on the market with a view to being sold (if at possible in the next few months) otherwise we would not be allowed to go ahead with the purchase of the new build property if it was part of a chain (independant) to sell the existing house to fund the new one).
My intension is to (hopefully) never use the L2B mortgage in Feb '16, but if we were unable to sell our current home then I wanted to know what ballpark CGT figure would be due if we rented OR we only sold our home (of 25 years) at some point next year after Feb '16 or let it out (having now begun the B2L+residential mortgage (in Feb next year) to finance the new property and still had our existing home to sell or let out.
One further question - Should we not get a tenant (or decide to leave the old house of 25 years temporarily unoccupied)... does that make any material impact in terms of a revised CGT recalculation short term? eg, in Feb'16 I I would have a L2B mortgage but no rental income and I just keep making the monthly payments until we do manage to sell the old home in say the following 3 months (May'16) that I secured the L2B mortgage on.
Expert:  Sam replied 1 year ago.
HI Understood - thanks for the full explanation and that position does not later in anyway - the advise I have given you on the capital gain position - and as you would have no rental income to offset the position - if you HAD to take out the Buy to let loan - then this would also not have any position UNLESS you let out the current property in which case the interest paid over the period of time that the property was let - could be offset against the rents. But to reiterate the capital gain position advised initially stands in tact - Let me know if I can be of any further assistance, but if you would take the time to rate the level of service I have provided it would be very much appreciated ThanksSam
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