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I'd like your advice on capital gains tax please. I bought a house few years ago for £150000 with residential mortgage.
I lived in it for 2 months then rented it out. I am now thinking of remortgaging it with buy to let mortgage and taking some money out. I was thinking of taking 100k out,
I wanted to know how the capital gains tax would be calculated if I decide to sell. I am currently earning 48k in my day job. If I I sell the house in few years time would I be charged 40% on the profit of the house (sold price - 150000- 100000 (mortgage)) or can I not deduct the mortgage of 100k?
If you have a residential mortgage without CTL and didn't ever notify anyone then there is no need to even consider CGT
Even with CTL if HMRC were never informed then don't tell them.
As far as anyone is concerned including HMRC your property with your only resi mortgage is CGT free!
It would take lot for HMRC to prove that your property on which you are entitled to have only one residential mortgage wasn't your PPR.
It wouldn't even occur to HMRC to ask.
So keep your mouth shut.
Rather than convert to LTB with S24 implications why not try and raise a bigger residential mortgage for Err! A car or any consumer excuse you choose to make!
Capital gains is worked out on the price you sell, less price you paid, less allowable deductions like legals and estate agent fees, less deduction for time you lived in the house as your own home.
Mortgages are not part of the equation whether resi or buy to let or a loan off you parents.
Get proper advice from an accountant or similar professional and don't try to trick taxman unless you like prison food!
If you have a resi mortgage you are only allowed one of them.
So how could HMRC prove that wasn't your PPR!?
When I sold my resi property at no time was I asked by HMRC whether it wasn't my PPR.
Chances of prison food..................ZERO!!
Well, it’s being documented on here for a start. The intention to commit fraud in black and white. What is to stop me or anyone else screen capturing this and emailing it to HMRC? Do you know who is on the forum reading the posts?
Capture what you like
HMRC would find it a struggle to prove that someone with a resi mortgage didn't have the property as a PPR
Why do you think there are so many Accidental LL who don't tell anyone they are letting their PPR?
They are evading tax and breaching mortgage and insurance conditions
There are reckoned to be over 300000 of them
When they sell not one of them will be paying any CGT!
It will however be very interesting what happens when the new LL redress scheme is introduced.
It will be a very convenient list for HMRC to compare with declared LL status or not.
That could cause many A LL to reoccupy their PPR or maybe take in lodgers instead.
With lodgers a homeowner might visit others a lot and hardly ever be at home!!
In fact when the LL redress scheme is introduced there will be many LL who leave the PRS as they will not be able to comply with the scheme requirements like CTL etc
I reckon about 1 million tenants will be made homeless because of the LL redress scheme as many LL are not complying with lender or insurance conditions as well as council requirements
Which will be great news as those LL remaining can jack up rents even more
There will be 1 million tenants looking for a new tenancy.
Can't wait for the LL redress scheme to start
It will cause chaos for the PRS as so many illegal LL have to leave the PRS
Was the property every advertised for let on a website?
HMRC now have access to the records of all the major sites. So if it was proving it wasn't being used as you PPR might not be difficult.
Of course they are working their way down from the biggest evaders so it might be a little while to they get to checking, but they advertised for 50 analysts to get their computer to do the checking this year so it is likely to be coming.
Just to add to this situation I remember maybe around last year that letting agents were having to send to tax department details of clients .
Council tax and utility records are easily checked by hmrc, so it depends if the rent is all inclusive or whether anything is in the tenants name. Also electoral rolls, phone bills, bank statements, credit history, etc, just depends if hmrc get a whiff of tax evasion and can be bothered to chase it up.
Imagine if hmrc somehow got hold of the tenant and then that tenant held the landlord to ransom instead of admitting the truth? Not a position I'd like to be in.
There are 300000 A LL
HMRC has done nothing about them nor will they.
The redress scheme could be the undoing of many illegal LL
Which is why I believe there will be an upsurge in 'lodgers'
If as a lodger you are informed that very rarely will the live in LL be around because he has a domestic situation elsewhere which requires his attention. A demanding girlfriend for eg!
Then few lodgers which could be a family would be concerned
Lodgers can even pay utility bills
Council tax and ER details obviously would be in the LL name at the address.
It really isn't hard to game the system if you know what you are doing
Accidental LL have to game the system
Lodgers would be an escape route for them.
I predict spareroom will be doing a great deal of extra business when the redress scheme is introduced!
I wonder if the scheme will require those live in LL with lodgers will need to join the scheme?
If so no big deal
Having lodgers means no CGT.
This is what any decent LL redress scheme should require
Btl mortgage type and CTL permission if a resi mortgage
Authority from lender to let to HB tenants
Tax reg no
That should see quite a few LL leave the industry! !!
Just seen the news with couple jailed for fraudulent claim against their tour company, I expect they thought there was no way they could be found out.
Talk to an accountant and declare the CGT due, not worth the risk however small it might be.