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Where Taxpayers and Advisers Meet
buy to let and buying 2nd property
I purchased my first house in Manchester in July 2003 for 96k and decided to move to Kent to stay with family in May 05 and found a new job. I let out the property since May 2005 and in Jan 06 remortgaged this property with a buy to let mortgage. I have been renting a house in Kent since March 06 and am now looking to buy a place in Kent. However, i don't wish to sell my house in Manchester until November 2007 as i am tied into the mortgage until then - it is still being let but the rent just pays the mortgage so i am not making a profit on the rent. If i go ahead and buy a property now in Kent, what is my situation with regards to CGT when i sell my place in Manchester in November 2007? Advice would be most welcome.
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King_Maker
- Posts:6538
- Joined:Wed Aug 06, 2008 3:22 pm
It depends whether the Manchester house was your home.
If it was your home from July 2003 until May 2005, then you will be exempt from CGT if you sell before May 2008 (possibly longer with Lettings Relief, Taper Relief etc).
You will need to consider whether its current value may be not be greater than its November 2007 value if property prices fall in the next 12 months, plus losing money on the rent etc. Paying the early redemption penalty may be the better option.
Have you read the Inland Revenue's Help Sheet IR283 which deals with CGT for private residences?
It is downloadable from their website.
http://www.hmrc.gov.uk/helpsheets/ir283.pdf
[CAVEAT : see Matthew Hutton's article of August 2005 where Lettings Relief falls within last 3 years of ownership :
http://www.taxationweb.co.uk/articles/a ... php?id=215 ]
If it was your home from July 2003 until May 2005, then you will be exempt from CGT if you sell before May 2008 (possibly longer with Lettings Relief, Taper Relief etc).
You will need to consider whether its current value may be not be greater than its November 2007 value if property prices fall in the next 12 months, plus losing money on the rent etc. Paying the early redemption penalty may be the better option.
Have you read the Inland Revenue's Help Sheet IR283 which deals with CGT for private residences?
It is downloadable from their website.
http://www.hmrc.gov.uk/helpsheets/ir283.pdf
[CAVEAT : see Matthew Hutton's article of August 2005 where Lettings Relief falls within last 3 years of ownership :
http://www.taxationweb.co.uk/articles/a ... php?id=215 ]
-
Instinctive
- Posts:1797
- Joined:Wed Aug 06, 2008 3:15 pm
I assume you lived in the property as your home since July 2003 to May 2005. If so, this period plus final 3 years ownership is exempted from CGT due to PPR relief. This would keep you clear of CGT at least until May 2008.
Additionally, as you have also let the property as residential accommodation, you are entitled to lettings relief upto a maximum of £40,000.
As mentioned by Kingmaker above, letting relief, taper relief and annual exemption means that you could keep letting the property a lot longer beyond May 2008 and still not have to worry about CGT.
Again, as Kingmaker mentions, you need to consider the property as an investment and decide whether you consider that house prices will increase and you will see capital appreciation or whether you are able to invest the money elsewhere for a better return.
My inclination would be to keep letting the property so long as it covers letting expenses and mortgage. Most investors do well if they hold the property for medium to long term.
However, I also consider London a much better location for property investment than the North.
Ramnik
Additionally, as you have also let the property as residential accommodation, you are entitled to lettings relief upto a maximum of £40,000.
As mentioned by Kingmaker above, letting relief, taper relief and annual exemption means that you could keep letting the property a lot longer beyond May 2008 and still not have to worry about CGT.
Again, as Kingmaker mentions, you need to consider the property as an investment and decide whether you consider that house prices will increase and you will see capital appreciation or whether you are able to invest the money elsewhere for a better return.
My inclination would be to keep letting the property so long as it covers letting expenses and mortgage. Most investors do well if they hold the property for medium to long term.
However, I also consider London a much better location for property investment than the North.
Ramnik
