re-mortgage and cpt

[vantagex]

I presume if you keep remortgaging a BTL,to buy more property,there is no CGT due.But what happens if you do this time and time again on the same property,retaining just 15% equity and you then decide to sell.

i.e. you buy at 100k with a 85% mortgage.Eventially the house is worth 200K but you have kept re-mortgaging and you end up with just 30K equity.The CGT would be on the 100K..correct?..so you could end up in a negative situation..

thanks.

[Chartered Tax Adviser]

The mortgage is irrelevant for CGT purposes. How you finance the purchase of the property is up to you, but this will not affect your CGT position.

Having said that, I can't see what you are getting at in your example. If you buy for £100k and sell £200k then you have a gain before any reliefs of £100k but this does not seem to tie up with the assumption you make in the first paragraph of your post.

[vantagex]

the point i am trying to make is this....most people seem to think the way to earn money from btl (other than possitive cash flow on rental)..is to re-mortgage as the value of the property goes up.Is this not dangerous?.In my example if you took the extra equity out up to, say 200k..you would be left with just 30k in the property..right?..so if you sell for 200K you could struggle to cover the cgt due...is that right?

[vantagex]

That is exactly what i was trying to get my head around.I am new to the btl business with 5 flats and i am trying to sort out how i am going to move forward.I am lucky that all the flats are possitive cash flow,but of course i want to get the most out of them.The general view is keep remortgaging everytime there is some growth, but i can see you can only go so far.Thank you for your replies all advice is appreciated

[Tax Accountant]

You can't have your cake and eat it.

If you keep taking out the equity from a property to buy another BTL, you are investing the equity. In that case, you should look at both properties together.

Also, one needs to look at the cashflow to decide whether it is worth selling a property at all if all the sale price is going to be taken up by redemption of mortgage, selling expenses, CGT liability on gains etc. In that case, one needs to see if it would be better to continue letting.

Ramnik

[vantagex]

You can't have your cake and eat it.


well put.........I have not done this just trying to plan ahead. thank you