Should ex-owner (now letting) sell or keep?

[clueless]

Hi all,

As my nickname suggests I am new to this forum and slightly clueless :confused:

My story is like this: I bought a house 3,5 years ago. I moved out recently, so I lived in the house for nearly 3 years since buying. I am currently part-letting it to a student, reserving part of the house for my own use as a second home. I live in rented accommodation when I am not there (i.e. most of the time).

My questions: Do I have to fill in a tax form and when (this year/next year)?

Any ideas how I can roughly calculate what they will charge me? I get more than 2,5K but less than 15K and I am not sure if I qualify for 'rent a room' (I think I don't since I don't any bills there and use it as a second home). Will it be based on my overall income (job earnings+rental income-expenditure????) How would I go about calculating the interest rate I am currently paying, especially if it fluctuates, and where in the form do I need to add this?

I am panicking slightly here..

I don't know what would make more sense, selling it within 3 years of moving out, or keeping it. I know it all kind of depends on facts and figures, but sometimes it's difficult to make any sense out of these or what my heart tells me.

Any advice on how letting allowance, taper relief, and other reliefs work out? Do I have to keep it more than 10 years for taper relief? How is letting allowance calculated? Oh and I read in another posting something about personal allowances. Are these linked to job earnings at any point in the calculations? or are they just for CGT purposes?

I'd be grateful for any advice. Ta very much.

[Tax Accountant]

How can anyone answer you on the basis of your post?

You own only one property as the one in which you currently live is rented. But as you also still use your owned property as your second home, you may be able to nominate your second home as your main residence for Capital gains Tax Private Residence Relief purposes.

Rent a room relief applies if your tenant uses the property as a lodger. It seems that you hardly stay there and don't even pay any bills.

Let your tax office know that you are letting part of your property and they will send you the relevant tax return and also Land & Property supplementary page for completion each year.

Loan interest is claimed on the basis of actual interest in £ (not in %)charged to you during each tax year. You can pick this figure up from your mortgage statements or obtain a certificate from your lender.

As far as Capital Gains is concerned, You have at least the final 3 years of ownership exempted. With all other allowances and reliefs available, you will not have to worry about any Capital gains Tax for a few years.

Ramnik

[clueless]

How can anyone answer you on the basis of your post?



Not sure what you mean by that, but thanks for your reply.

If anyone can shed some light to the conditions that have to be met to qualify for taper relief and/or any other exceptions that would be helpful.

[MrShed]

I think he means that it depends a lot more on your current personal position and circumstances as to whether you should keep it or sell it, not just about the tax payable.

[clueless]

I think he means that it depends a lot more on your current personal position and circumstances as to whether you should keep it or sell it, not just about the tax payable.

Oh, I see. Well there is a possibility that I may be buying a house with my partner at some point within the next year - we are trying to save every penny we can. I would like to keep the other house but I am not sure what that translates to money wise - CGT - if I suddenly decide to sell at some point in the future.

[Tax Accountant]

My story is like this: I bought a house 3,5 years ago. I moved out recently, so I lived in the house for nearly 3 years since buying. I am currently part-letting it to a student, reserving part of the house for my own use as a second home. I live in rented accommodation when I am not there (i.e. most of the time).

You own only one property as the one in which you currently live is rented. But as you also still use your owned property as your second home, you may be able to nominate your second home as your main residence for Capital gains Tax Private Residence Relief purposes. You need to write to your tax office and make a nomination in favour of this property.

As far as Capital Gains is concerned, You have at least the final 3 years of ownership exempted. With all other allowances and reliefs available, you will not have to worry about any Capital gains Tax for a few years.


Do I have to fill in a tax form and when (this year/next year)?

Let your tax office know as soon as possible that you are letting part of your property and they will send you the relevant tax return and also Land & Property supplementary page for completion each year. The first period for you will be from commencement of letting recently to next 5 April. The tax return needs to be submitted, and tax due needs to be paid, by 31 January 2008. Thereafter this will be every 12 months upto each tax year ending 5th April.

Any ideas how I can roughly calculate what they will charge me? I get more than 2,5K but less than 15K.

There is a big margin between these two figures. What are they supposed to represent? Rental income. other income, total income or what?

I am not sure if I qualify for 'rent a room' (I think I don't since I don't any bills there and use it as a second home). Will it be based on my overall income (job earnings+rental income-expenditure????)

Rent a room relief applies if your tenant uses the property as a lodger. It seems that you hardly stay there and don't even pay any bills. It appears that you will not qualify for rent a room relief.

How would I go about calculating the interest rate I am currently paying, especially if it fluctuates, and where in the form do I need to add this?

Loan interest is claimed on the basis of actual interest in £ (not in %)charged to you during each tax year. You can pick this figure up from your mortgage statements or obtain a certificate from your lender.

I am panicking slightly here..

Regarding what?

I don't know what would make more sense, selling it within 3 years of moving out, or keeping it. I know it all kind of depends on facts and figures, but sometimes it's difficult to make any sense out of these or what my heart tells me.

As far as tax is concerned, this should not stop you from continuing to let. You need to look at the location of the property, rental yields, likely capital growth and above all, whether there is likely to be good tenant demand for the property. Also, do you have other better suggestions for investing the money elsewhere?

If you need the money to buy a home for yourself elsewhere sometime soon, it would make sense to sell.

Any advice on how letting allowance, taper relief, and other reliefs work out? Do I have to keep it more than 10 years for taper relief? How is letting allowance calculated?

Taper Relief is 5% after 3 complete years of ownership. This increases by further 5% for every complete year's of ownership thereafter until it reaches the maximum of 40% after 10 complete year's of ownership since April 1998.

Lettings relief is the lower of: (1) £40,000, (2) equal to gains exempted due to private residence relief (3) equal to gains chargeable due to letting.

Oh and I read in another posting something about personal allowances. Are these linked to job earnings at any point in the calculations? or are they just for CGT purposes?

Every individual have tax-free personal allowances for income tax (presently £5,035) as well as separate tax-free personal allowances for Capital Gains Tax (presently £8,800). These allowances are lost to the extent they have not been used up in any given year, ie any unused allowances cannot be carried forward to subsequent years. Use it or lose it.

I'd be grateful for any advice. Ta very much.

Hope this is more than you expected.

[clueless]

I'd be grateful for any advice. Ta very much.

Hope this is more than you expected.


Tax Accountant - yes, indeed, that went beyond my expectations. Thanks very much.

Having the extra allowance of 8,800 for CGT (in addition) is a major thing, it's good to know that.

Most grateful.

[Tax Accountant]

Good luck and best wishes for successful property letting and investment.

Ramnik