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  1. #1
    Join Date
    Jan 2011
    Posts
    1,401

    Default Selling one rental property and using all of the proceeds to buy another rental

    Hi

    I understand that if you sell a rental property you have to pay CGT.

    I have a ground floor two bed maisonette that I'm considering disposing of, but I want to buy either a two bed house or an upstairs two bed maisonette straight away.

    Is there anyway I can avoid CGT? I'd be reinvesting every single penny.

  2. #2

    Default

    Quote Originally Posted by Claymore View Post
    Hi

    I understand that if you sell a rental property you have to pay CGT.

    I have a ground floor two bed maisonette that I'm considering disposing of, but I want to buy either a two bed house or an upstairs two bed maisonette straight away.

    Is there anyway I can avoid CGT? I'd be reinvesting every single penny.
    You have a £10k-ish annual allowance, and can count various items against CGT I think.

    How much did you spend on improvements?

    http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm#4

    How much is your actual taxable capital gain, bearing in mind that house prices have collapsed in the last 5 years and your profile says you are a newish LL?

    Do you have any tax losses you can offset against the gain?

    ML
    Refer Mad Regulators to Arkell vs Pressdram.

  3. #3
    Join Date
    Aug 2008
    Posts
    2,530

    Default

    Or tax losses you can crystallise by selling shares, for instance.

    Or a wife?

    There is no relief for reinvestment, sorry.

  4. #4
    Join Date
    Jan 2011
    Posts
    1,401

    Default

    Hi

    I bought below market value so I don't have any loses in that area. After accounting for my renovation costs to it, my gross profit would be about £30K. My CGT allowance is around £10K I think, then I could add other tax loss of about £1k. So I guess my CGT bill will be based on about £19K.

    I'm not married at the moment (maybe next year or the year after) - but my husband (I am female) to be is in a higher tax bracket.

    If I sold soonish - and the payment I have to give to Mr HMRC is based on 19K, I'm a lowish earner - so would my figure be 18% of £19k?

  5. #5
    Join Date
    Aug 2012
    Posts
    109

    Default

    The taxable gain (the £19k) would be added to your earnings/other income and that might push the rate up to 28% on part of the gain. So it depends on your level of income. For 2012/13 the personal allowance is £8,105 and the basic rate band is £34,370. So, add the taxable gain to your earnings/other income and if it takes you over £42,475 (that’s £8,105 plus £34,370) the excess will be taxed at 28% rather than 18%.

    I don’t suppose you ever lived there did you? That would change things.

  6. #6
    Join Date
    Jan 2011
    Posts
    1,401

    Default

    Quote Originally Posted by Mr Green View Post
    The taxable gain (the £19k) would be added to your earnings/other income and that might push the rate up to 28% on part of the gain. So it depends on your level of income. For 2012/13 the personal allowance is £8,105 and the basic rate band is £34,370. So, add the taxable gain to your earnings/other income and if it takes you over £42,475 (that’s £8,105 plus £34,370) the excess will be taxed at 28% rather than 18%.

    I don’t suppose you ever lived there did you? That would change things.
    No, I haven't lived there. I might just come in under the higher tax bracket. Many thanks.

  7. #7
    Join Date
    Jan 2007
    Posts
    2,228

    Default

    Remember your acquisition costs, SDLT ect and your slaes and legal fees are deductible against the gross gain. Regards Peter

  8. #8
    Join Date
    Jan 2011
    Posts
    1,401

    Default

    Quote Originally Posted by TaxationPete View Post
    Remember your acquisition costs, SDLT ect and your slaes and legal fees are deductible against the gross gain. Regards Peter
    Thanks Peter.

  9. #9
    Join Date
    Aug 2008
    Posts
    2,530

    Default

    How long have you held it, and how long has it been let out?

  10. #10
    Join Date
    Jan 2011
    Posts
    1,401

    Default

    Purchased in 2009 and always let out.

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