Buy to let

[s.bradford@bristol.a]

My wife and I are planning to move house. We are considering letting our present property rather than selling it.

The property has made about 60k in two years, we have a mortgage of about 85k and the house has a value of about 145k. I am interested in the CGT we would have to pay on the equity.

Reading around the subject has lead me to the conclusion that if we were to sell within five years of begining to rent then all the equity would be tax free; am I correct?

Further years gain in price would be exempt for the total of our combined CGT allowances, 14800 this year, am I correct here?

Or could we end up losing more in CGT, meaning that we could be better off selling now, realising the equity and buying a bigger house for ourselves?

[Ian McTernan CTA]

The value of the house in future years if you rented it out is combined with the base cost in working out the PPR exemption, so even if the value did not rise in ten years time you could be facing a CGT bill. It is not possible to determine when the tax free period would end, apart from the 36 month rule there is also the annual exemption (a one-off each year, not cumulative) and the leting exemption to consider, along with changes in the legislation.

It really depends on waht your future intentions are and how long you would rent it out for and whether you need the income, but consideration could be given to selling into your own company.

I would be happy to advise further.

Regards.

Ian McTernan CTA
McTernan Associates Ltd
ian@imcternan.com