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Realistbear

B T L Owner Bailing Out Gets A Tax Sting

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http://www.thisisnorthscotland.co.uk/displ...&folderPk=85697

WILL I GET TAX RELIEF ON MY PROPERTY?

09:00 - 17 April 2006

Q: I Live with my parents and own a buy-to-let property which has increased in value quite substantially over the past three years.
I am now looking to sell
this and, as I do not own another property, am I able to nominate this as my residence to benefit from capital gains tax relief? - W.L., Portlethen.
A: The capital gains tax relief you refer to is principal private residence (PPR) relief. This is only available to the owner of a house if they occupied it as their only or main residence. Unfortunately, an intention to occupy it is not sufficient to qualify for this relief.

This will be a tragic story to be repeated many times in the coming months as more BTLers try to get out rather than hang on in the hope that houses only ever go up in price. The cost of exiting will have to be added to capital losses as the market prices recede.

Tragic story. :(

( :D )

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Guest muttley

Why doesn't he move in?

Surely if he lives there for a couple of months it becomes his main residence. He would be able to show a few utility bills, and avoid CGT.

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Why doesn't he move in?

Surely if he lives there for a couple of months it becomes his main residence. He would be able to show a few utility bills, and avoid CGT.

Maybe he fears a substantial decline in property prices soon, and wants to sell whilst he can?

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This will be a tragic story to be repeated many times in the coming months as more BTLers try to get out rather than hang on in the hope that houses only ever go up in price. The cost of exiting will have to be added to capital losses as the market prices recede.

Capital Gains Tax is only payable if they actually make a gain above the applicable threshold. However, if they've MEWed equity it's possible they could be trapped by not having enough free cash to pay the tax.

Surely if he lives there for a couple of months it becomes his main residence. He would be able to show a few utility bills, and avoid CGT. [muttley]

See 'Is your Principal Private Residence Property totally CGT tax-free?':

http://www.taxationweb.co.uk/capitaltaxes/article.php?id=186

We are so used to saying that the sale of a Principal Private residence is CGT-free that we are in danger of forgetting that two conditions have to be fulfilled in order for that to be so:-
  1. the property must not have been purchased for the sole reason of making a profit and
  2. that to be exempt the property (dwelling house) must be an individual's only or main residence throughout the period of ownership

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See 'Is your Principal Private Residence Property totally CGT tax-free?':

http://www.taxationweb.co.uk/capitaltaxes/article.php?id=186

We are so used to saying that the sale of a Principal Private residence is CGT-free that we are in danger of forgetting that two conditions have to be fulfilled in order for that to be so:-

1. the property must not have been purchased for the sole reason of making a profit and

2. that to be exempt the property (dwelling house) must be an individual's only or main residence throughout the period of ownership

simpsons506fx.gif

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Capital Gains Tax is only payable if they actually make a gain above the applicable threshold. However, if they've MEWed equity it's possible they could be trapped by not having enough free cash to pay the tax.

Yep, I wonder how many BTL idiots have used MEW to fund their lifestyles.

When they decide they need to sell the tax bill may turn out to be a very unpleasant surprise.

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Guest Guy_Montag

Yep, I wonder how many BTL idiots have used MEW to fund their lifestyles.

When they decide they need to sell the tax bill may turn out to be a very unpleasant surprise.

I wonder how many were aware that they would have have to pay capital gains tax when they sell.

On edit: In fact, just a thought, but one of my colleagues (& for that matter my ex landlady) rather than sell their houses when they moved, they kept them on to rent out. That must mean they will lose 40%(?) of their capital gains when they come to sell, rather than getting the full increase had they sold when they left.

Edited by Guy_Montag

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I know someone who bought a house. Bought a flat and rented the house out for 6 months. Then sold the house.

They didn't pay any CGT but i'm not sure if this was done dodgily.

What happenes if you want to move but can't sell but have to move. If it takes to long to sell your old property are you allowed to rent it out for a while and avoid CGT when you do sell. Also does the property have to be one the market the whole time if this is so?

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Guest Guy_Montag

I know someone who bought a house. Bought a flat and rented the house out for 6 months. Then sold the house.

They didn't pay any CGT but i'm not sure if this was done dodgily.

What happenes if you want to move but can't sell but have to move. If it takes to long to sell your old property are you allowed to rent it out for a while and avoid CGT when you do sell. Also does the property have to be one the market the whole time if this is so?

If you can't sell, but want to, you're obviously asking too much.

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I wonder how many were aware that they would have have to pay capital gains tax when they sell.

On edit: In fact, just a thought, but one of my colleagues (& for that matter my ex landlady) rather than sell their houses when they moved, they kept them on to rent out. That must mean they will lose 40%(?) of their capital gains when they come to sell, rather than getting the full increase had they sold when they left.

The rules are actually more complicated in "Let to Buy". Whoever is doing this should get an accountant.

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CGT on former PPRs.

On edit: In fact, just a thought, but one of my colleagues (& for that matter my ex landlady) rather than sell their houses when they moved, they kept them on to rent out. That must mean they will lose 40%(?) of their capital gains when they come to sell, rather than getting the full increase had they sold when they left. [Guy_Montag]

Any gain will be apportioned. For example, if it was their PPR for 5 years and they rented it for 5 more years before sale, they would only be liable for CGT on half the gain.

I know someone who bought a house. Bought a flat and rented the house out for 6 months. Then sold the house.

They didn't pay any CGT but i'm not sure if this was done dodgily.

What happenes if you want to move but can't sell but have to move. If it takes to long to sell your old property are you allowed to rent it out for a while and avoid CGT when you do sell. Also does the property have to be one the market the whole time if this is so? [Anti_Claus]

See 'Is your Principal Private Residence Property totally CGT tax-free?':

http://www.taxationweb.co.uk/capitaltaxes/article.php?id=186

Some relief is available for all these unusual circumstances in that the first year and the last three of ownership are always treated as periods of occupation, irrespective of whether actual occupation takes place. This valuable exemption helps to cover situations where it takes a long time to sell a house and find somewhere else to live.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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