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Where Taxpayers and Advisers Meet

CGT and loss on property investments

petrushka34
Posts:1
Joined:Sun Apr 17, 2016 8:15 pm
CGT and loss on property investments

Postby petrushka34 » Sun Apr 17, 2016 8:20 pm

Hello,

Your help would be much appreciated in understanding the taxation of my property affairs.

In 2007, I bought a flat with the intention to live there myself and I took out a residential mortgage. Straight after the purchase, I had 'cold feet' about my monthly mortgage repayments and the estate agent was trying to persuade me to let the flat out so, 2 months after my flat purchase, I became an accidental landlady - the lender was informed.

From 2007 to January 2016, when I sold the flat, my mortgage remained a residential mortgage with ‘consent to let’. This flat was my only property. Throughout this period, I lived in my reasonably affordable rental accommodation.

I purchased the flat for £250,000 in 2007 and sold for £386,000 in January 2016, therefore my capital gain is £136,000. From the £136,000 I deducted expenses for a major renovation to the flat (carried out when the tenants left and the flat was prepared for sale) plus other expenses (Stamp duty, solicitors’ fees, estate agent’s fee). I am a 40 per cent taxpayer, and on the remaining capital gain of £97,000, minus capital gains tax allowance of £11,100, I would pay 28 per cent tax, which is £24,052.

Now, I am looking for a residential property to buy and finally settle down in my own home, however, in 2013, as an investment opportunity, I exchanged contracts on 3 small off-plan apartments for BTL. 2 of them, in Hull, have not been built as the developer ceased trading. Consequently, I acquired a loss of £12,500, which was officially confirmed by solicitors, in January 2016. I completed on the third property located in Kent, in February 2016; I paid cash from the proceeds of my flat sale, and therefore I do not have a mortgage. The Kent property is unoccupied and currently up for sale. The capital gain from the sale of the Kent property is expected to be within the Capital gains tax allowance of £11,100.

My questions are:

1. If the property I bought in 2007 was my only property, even though I never lived there, do I still have to pay Capital gains tax?

2. To my understanding there is no Letting relief as the property was not my place of residence. Is this correct? If I am wrong, could you please explain the Letting relief?

3. Is this anything to do with ‘taper’ relief?

4. Where can the loss of £12,500 be deducted from? Is it from the capital gain of £97,000 or from the capital gains tax of £24,052 or, could it be off-set against my self-employment income? The £12,500 was from my savings and initially was paid to an estate agent and then to the developer’s solicitor, when I agreed to purchase off-plan units.

5. Is this anything to do with Allowable Loss, could you please explain?


6. The third property I completed on in February 2016 is still on sale. If I am to buy my residential property while the third property is on sale, what stamp duty do I have to pay, residential or second-home rate?

Thank you

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