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bigduckontax
bigduckontax, Accountant
Category: Tax
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I bought a buy to let property 4 years ago but did not rent

Resolved Question:

hello. I bought a buy to let property 4 years ago but did not rent it out. I allowed my parents to stay there for free. I now want to sell the property what is my tax liability? I am a higher rate payer of income tax. Thank you
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and plesed to be able to help you with your question.

On the assumption that this was not your sole or main domestic residence you will be liable for Capital Gains Tax (CGT) on the gain made on disposal. The gain is the difference between the net selling pirce ie fater deducting selling costs including advertising and the acquisition price. The latter is the purchase price plus pirchase costs including Stamp Duty Land Tax plus any improvemnets eg installation of double glazing, central heating, extensions but not routine maintenance. This will be levied at 28% on the gain less your 11.1k non cumulative Annual Exempt Amount (AEA).

I do hope that you have found my reply of assistance.

Customer: replied 1 year ago.
Thank you but what about tax re interest part of my repayment versus capital part of my repayment? also would my parents count as dependent relatives and can this be claimed. I did not receive any payment from them at all. thanks
Customer: replied 1 year ago.
also with the AEA is that something i can claim every year I own the property or only once on selling> for example I have owned the property for 4 years?Thank you
Customer: replied 1 year ago.
What about dependant parents exemption ?
. Also does mortgage interest paid count as purchase costs ?
Expert:  bigduckontax replied 1 year ago.

The interest element would indeed be allowable against any rental income received, but as there was none there is no relief available.

Dependent relative occupation used to be allowable in the CGT computation, but is no longer, blame Gor***** *****:

'A Relief from capital gains tax on the sale of a house inhabited by a dependent relative only applies to a residence acquired before April 5 1988. That was one of the tax concessions phased out by Gor***** ***** as part of his drive to boost the coffers of the Inland Revenue.'

AEA, as I explained in my original answer is a non cumulative item. You get it ionly in the year you sell.

Mortgage interest does not come into the purchase costs, but the charges imposed to obtain the mortgage do.

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Expert:  bigduckontax replied 1 year ago.

Thank you for your support.