Tax - capital Gain. Ive heared its all changing & need advise to sell 2nd property?

Question

owned since 1991, risen from purchase of £38,450, up to approx £100K now.........
Rental income not great, 100% endowment mortage

Answer 1

"One step down from God" gives sound advice.
Go spend a few pounds by seeing an accountant to discuss the matter in detail and receive further advice.

Answer 2

Yes, you should seriously consider selling before 5th April 2008 but it might not be in your interests.

Your gain starts off at about £61,000 (£100,000 less £38,450 less selling costs).

As you bought in 2001 you will be able to claim indexation relief for the period up to 1998. This will be between 20 and 24% of the cost price depending upon which month you bought it in. That means about £8,000 so the indexed gain will become about £53,000.

Then you can claim taper relief for the period after 1998. You will be entitled to the maximum ten years (9 hears held between 1998 and 2007 plus a bonus year). This knocks another 40% off the gain leaving about £32,000.

Then you deduct the annual exemption (£9,000 to keep it in round numbers) to leave £23,000.

The rate of tax will depend on your total income for the year but the maximum would be 40% (which assumes your other taxable income is over £39,000). So the maximum tax payable will be about £9,000.

After April you will take the original gain of £61,000, deduct the annual exemption (probably £10,000 by then) and pay 18% of the balance which would also be about £9,000.

You need to do the sums to see if you will actually benefit or not.

Of course, the details of the new regime may change in the budget so it is a bit of a gamble.

Answer 3

I think you may be well advised to sell.....at the present time there is a sliding scale of relief so you pay less tax the longer you own a property...the proposal is that there will be just one tax band of 18% regardless of how long you have owned it, whereas now I think the lowest rate is 10%. I am no financial expert, so you may be as well to get some professional advice....I have also read that the Chancellor is having second thoughts....so the choice is yours.
I take it your are claiming tax relief on the mortgage interest you pay.

Answer 4

If the property was AT ANY TIME your sole main residence then you may be able to claim some important reliefs which will completely change tringyokel's figures.
In either case it's probably worthwhile consulting an accountant.