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
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