I have 2 houses both with mortgages and I am considering selling the one I do not live in and rent out. Do I have to pay capital gains if I use the equity earned to pay off part or all of the mortgage on the house I live in ?????
2006-11-13 04:16:19 · 4 answers · asked by gazzabicks 1 in Business & Finance ➔ Taxes ➔ United Kingdom
Yes, you will need to pay CGT, no matter what you do with the sale proceeds. If you have ever lived in the house, however, you will be eligible for a relief proportional to the period of ownership when you lived in it. In addition, you may be eligible for taper relief of the property as a non-business asset, which reduces your liability depending on how long you've owned it - see table in link (which is a list of FAQ for CGT you may find useful in any case)
2006-11-13 04:30:26 · answer #1 · answered by Graham I 6 · 0⤊ 0⤋
Yes you do, but make sure you get some good advice on how to calculate the gain. Some of the answers above are a little misleading.
The amounts you can deduct from your disposal proceeds are any costs of the disposal, the original purchase cost (which might not necessarily be the mortgage figure!!) and any costs associated with the purchase, and any capital improvement costs.
Any costs which you have been deducting from you rental income to work out the taxable profit on that income can not be used again on the disposal (ie. general maintenance costs).
You may get taper relief depending on how long you have held the property and there is an annual exemption from gains which in the current tax year is £8,800.
As for the suggestion you should pretend to have lived in the property to avoid paying tax, this would be tax evasion and is illegal! Not good advice!!
2006-11-17 00:09:34 · answer #2 · answered by John N 2 · 0⤊ 0⤋
Yes, but don't forget to take off the amount you have paid to the mortgae provider and general maintenence on the property. These expenses should be taken off the 'profit' before declaring it. You are also allowed about £8500 capital gains in a tax year beofre any tax is due.
2006-11-15 00:56:01 · answer #3 · answered by myownprivateroad 3 · 0⤊ 0⤋
YES..... Because the money you have made on the house will be regarded as income/profit ...you need to either move back in for 6 months or have all household bills and council tax in your name to make it look like you have been living there...MONEY GRABBING BASTARDS ... don't you agree..?
2006-11-13 04:32:52 · answer #4 · answered by Nibbles 2 · 0⤊ 0⤋