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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 16712
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am considering keeping my flat South London and buying a

Customer Question

Hi, I am considering keeping my flat South London and buying a new place and would appreciate some cgt tax advice
Assistant: Where are you? It matters because laws vary by location.
Customer: I’m bard in London. I bought the flat on 2007 and have renters it out since November 2017
Assistant: What steps have you taken so far?
Customer: I’ve been renting since and live with family currently
Assistant: Anything else you want the Lawyer to know before I connect you?
Customer: The flat value is approx 375k and I bought it for 202k. I still owe 202k I have an interest only residential mortgage and borrows 100% to buy the place. I’ve compkdyely modernised it with my own money
Submitted: 6 months ago.
Category: Tax
Customer: replied 6 months ago.
I’m thinking of either keeping my flat as a long term Rental investment and releasing 75% of the property value by remortgaging and using the released funds to put down on a new place. The other option I am considering is to sell my flat in London and by a cheaper place to live in and also buy a rental investment in Nottingham. I work in finance and have been a mortgage broker for years. I now work for a bank and don’t sell mortgages. Current base income is 30k gross per annum. My current gross rental income is 1350 per month sterling.
Customer: replied 6 months ago.
I’m trying to ascertain if I keep my flat, how will I be affected by Cgt tax?
Expert:  TonyTax replied 6 months ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 6 months ago.

The CGT rules for residential property are changing significantly with effect from 6 April 20120. See here.

As of now, if you sell the property today, the gain for the period that you lived in it and the gain for a maximum of the last 18 months of ownership when you are not living there will be tax free. That would leave about 5 months worth of the gain subject to CGT which may be covered by letting relief. See HS283.

From 6 April 2020, the last 18 month relief will be reduced to one of 9 months. Letting relief will be available only to those property owners who live with their tenant. So, if you sold the property on 6 April 2020, the gain for the period that you lived in the property and the gain for the last 9 months of ownership will be tax free leaving 20 months worth of the gain taxable. The first £12,000 of gains made by an individual in any one tax year are tax free.

If you draw out some equity, whilst it will not be taxable, when you sell the property it will form part of the capital gain. That won't be a problem so long as your property does not lose value or better still rises in value.

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

Expert:  TonyTax replied 6 months ago.

Hi again.

I'm just following up to find out if my answer helped or if you have any further questions. If not, would you mind rating my answer so that I get credited for my work.