Capital Gain Tax - Buy to let - Urgent please

Landlord Discussion
1

Hi

Hope someone can help me please.

I am in the divorce process. I am selling 2 buy to let properties ( A & B ) and property A, I am giving to my Ex and property B, I want to sell it and use the deposit to buy a house for myself.

Question: Property B has got 20k Capital gain from original price I bought 3 yrs ago, now as I am buying a house for myself after divorce, Do I have to pay Capital Gain Tax?

Thanks for your time.

2

Yes, you will have to pay capital gains tax if it was a rental property.

You can offset some of your costs:

  • stamp duty
  • legal fees for purchase and sale
  • capital expenditure on improvements
  • estate agents fees
    etc
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3

Thanks for your reply @David122

Sorry to ask you another question :-

Can I ask as I am just selling buy to let and using that money for buying home for myself, why there will be CGT as I am not investing anywhere again?

Thanks

4

It wouldn’t make any difference if you were investing the money elsewhere as there is no ‘carry over’ allowance for CGT on rental properties. Its a straightforward case. Almost all landlords will have to pay CGT when they sell their properties, unless they chose poor investments in the first place.

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5

You can also use the capital gains tax allowance which means first £12,300 of any gain is cgt free (assuming you haven’t used allowance on other assets) so after deductions David has mentioned the tax bill is unlikely to be large.

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6

Thanks @David122
I appreciate your quick response.

7

Thanks @Richard19

I appreciate your advice.

8

Did you ever live in it? Or could you move in and live in it as your main residence before you sell? If you have genuinely lived in it, the period you lived in it and the last 9 months is tax free. (Although a married couple can only have one main residence).

If you sell and have CGT to pay, you have to pay it within 30 days of sale now too.

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9

20k Gain minus 12.3 k CGT allowance minus let’s say 2.7k buying and selling costs = 5k taxable gain at either 18% if you are a basic rate taxpayer (£900 tax) or 28% if a top rate taxpayer (£1400) so nothing nothing to lose sleep about .

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10

I’m no expert in this area but I want to pose the question to fellow Landlords who will have more knowledge in this area.

If Singh moves into the rental property for a period, is it 6 months or 1 year, and makes that his primary residence, also transferring all bills and council tax into his own name, can he not avoid Capital Gains Tax because he will then be selling his main home.

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11

To expand on this idea, don’t buy a new place just yet. Move into your rental property for relevant period so it becomes your main residence.
Then sell it later and buy whatever you are looking for at that time.

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12

If purchased with a BTL mortgage, then there are likely to be restrictions on the landlord moving into the property. It would also need to genuinely become their PPR, not a sham switching of postal addresses or similar. The benefits of doing it are also not what they used to be and given the hassle involved, I doubt its in the interest of many landlords to do it.

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13

Only the time you live in it and the last 9 months would be tax free. You apportion the gain between the period you’ve lived in it and the period you rented it out.

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14

Dear Mr Singh

Firstly really sorry to hear about your personal situation, if there is a possibility to avoid a divorce this should be the 1st step to think of.

Leaving aside your personal matters, CGT is not a yes or a no answer. It all depends on the histoy of the property, structure it is owned as, any works carried on the property, etc. Feel free to call me on 020 8241 6642 and I can give you some of my time to discuss your situation and assist you.

All the best!

Jay

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