CGT on Single let property

[Uncle Fester]

A friend of mine has a property which she is letting out, would she be liable to pay CGT if and when she sells? (This is the only property, she owns).

Thanks in advance.

[Tax Accountant]

A friend of mine has a property which she is letting out, would she be liable to pay CGT if and when she sells? (This is the only property, she owns).

Thanks in advance.

This will be chargeable to CGT. Whether she pays any CGT will depend on certain factors, such as:

1. How much gain she realises during her ownership of the property. Note that first so much of the taxable gains (after deducting all reliefs and allowances) is covered by annual exemption which for the current tax year is £8,800 and CGT is levied only on the remainder.

2. Has she lived / will she live in the property as her only or main residence (ie occupy it as her home) at anytime in her ownership before she eventually sells? If she can do this, it will exempt a considerable amount of gains.

3. How long she keeps the property before selling; the longer the better as Taper Relief kicks in at 5% after 3 years of ownership and reaches a maximum of 40% after 10 years of ownership.

4. How much other taxable income and gains she has during the year of disposal. This dictates the rate of tax which is applied to the taxable gains on the property.

5. Whether she emigrates for at least 5 complete UK tax years to another country before selling the property. However, she would then need to check her exposure to the tax of the country to which she has emigrated.

I hope this helps.

Ramnik

[Uncle Fester]

If she remortgage's it, will she have to pay any tax on this? :confused:

Many Thanks

[Tax Accountant]

If she remortgage's it, will she have to pay any tax on this? :confused:

Many Thanks

There in no tax as such on the amount she raises by re-mortgaging.

Re-mortgaging is actually a form of loan which she will need to pay back at some point in time.

I believe that sometimes it makes sense to re-mortgage to raise the money required rather than actually selling a property, especially if selling is going to result in charge for Capital Gains Tax, loss of rental income which is paying off your mortgage, and most importantly loss of potential future growth in the value of the property.

But you must also look at the wider picture such as what you plan to do with the money raised, whether or not the property is located in a good growth area and whether there is good rental demand for the property.

Ramnik

Ramnik