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Where Taxpayers and Advisers Meet

use private lettings relief or sell now ?

m@joxo.co.uk
Posts:2
Joined:Wed Aug 06, 2008 3:31 pm

Postby m@joxo.co.uk » Sat Nov 19, 2005 11:13 am

below is my question:

I bought a flat in July 2001 and lived in it until July 2003 i.e. it was my main residence. Then I moved out and let it to a couple who are moving out in december 2005.

I now have two choices - sell the flat or let the flat out again. I'm confused about what to do.



Here are the figures.



a. I purchased the flat for 176K in July 2001.

b. Lets say in June 2006 it is worth 236K.

c. This is a gain of 60K which will be tax free if I were to sell the flat in June 2006 as I moved out in July 2003.

I would probably use the money to purchase a property in east london which will increase in price quicker.


If I were to hold the flat until 2010 I can't work out what my gain would be. Here is how I think it works:





Scenario:

In June 2010. Flat is worth 266K



From what I understand about the law:

a. I would have a gain of 266-176=90K

b. Of this, 2 years residence and 3 years ppr would be calculated as: (90/9 years)*5=50K. I would get this tax free.

c. Private lettings relief would be 40K.

d. Therefore, I would pay CGT of 10K (covered by my allowance).



Is this correct ?



Still not sure whether its better to hold it or sell it and buy another. Any advice from your experiences would help.

Forgot to add – in addition the freehold is being purchased soon and it will cost me around £10K. I would probably purchase this if I were to let the property for 5 years as only 65 years remains on the lease.

Thankyou,
Mike

JasonButcher
Posts:39
Joined:Wed Aug 06, 2008 3:24 pm

Postby JasonButcher » Mon Nov 21, 2005 8:12 am

You have nearly calculated the gain correct but you got the letting relief incorrect.
Letting relief is the lower of : -

1) PPR Expemtion
2) Gain After PPR Exemption
3) £40,000.

m@joxo.co.uk
Posts:2
Joined:Wed Aug 06, 2008 3:31 pm

Postby m@joxo.co.uk » Mon Nov 21, 2005 9:46 am

For me this is:
1. 50K
2. 40K (90-50)
3. 40K.

Not sure where is this is incorrect. Can u point this out ?

JasonButcher
Posts:39
Joined:Wed Aug 06, 2008 3:24 pm

Postby JasonButcher » Tue Nov 22, 2005 1:01 am

that looks about right


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