Hi everyone
I have an unusual situation but can anyone see a flaw in my maths?
I have a two bedroom property in London, worth say £1m. If I live in it and rent out one bedroom, these calcs apply:
Rent is 1100 per month
Annual rent is 13200
Estimated costs 0
Gross profit 13200
Rent a room relief 7500
Tax 2280
Net profit 10920
(Assuming tax at 40% in excess of rent a room)
HOWEVER, if I rent out two bedrooms I may incur CGT on half the gain which, at 3% property price growth (too low?), is more than the additional rent:
Rent is 1100 per room per month
Annual rent is 26400
Estimated costs -2000
Gross profit 24400
Tax 9760
Net profit 14640
Annual gain 30000
50% CGT @ 28% 4200
Net net profit 10440
-Ignoring lettings relief and 18 month rule.
I realise CGT isn't paid annually but it's still a worthy consideration. Am I missing something?
Thank you
Sandy
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