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Wonder if anyone in the tribe could advise please.
I lived in one of my (two) rental properties for 13 years. I've rented it out for around 6 years with the same family resident for 5 years. I am wondering about strategy, and need advice on two issues:
1. What CGT would I incur if I sold this? I'm a high rate tax payer with a proper job.
2. Could I approach tenant with offer of them renting to buy, with a monthly contribution to mortgage, and maybe taking over responsibility for maintenance and free to develop with relevant permissions, along with a lower rental portion on revised monthly payment?
I presume the answer to 1 affects arrangement for 2, but tax must reduce as my rental will go down, but I will be making capital repayments out of my monthly "income", so lower income tax bill?
If I arrange to do this with tenant for say 10 years and agree to split CG profit with them 50/50 over and above the agreed current value. We can either sell or they can secure mortgage at end.
Good tax strategy toward lump sum pension payout in my late 50s?
Would be great if I could buy a handful of properties in the ten years and maybe make the same arrangement with my other tenants who are lovely and have been with me 3 years, and were with their last LL 23 yrs, but LL sold block of flats.
Thoughts and advice greatly appreciated.
Edit: meant to say, can I set off capital repayments on mortgage as an expenses against profit? Not interest, that will be whatever it is under s24, but I mean the capital repayment part of the repayment mortgage I'll have. Is that correct?
"Change is a prerequisite to longterm survival".
The establishment is rigged so that the rich stay very rich, and the poor get poorer.
You said -
"I lived in one of my (two) rental properties for 13 years. I've rented it out for around 6 years with the same family resident for 5 years. I am wondering about strategy, and need advice - What CGT would I incur if I sold this? I'm a high rate tax payer with a proper job."
A. The net profit after purchase costs and capital improvements etc get divided by the number of years that you've owned it.
e.g - Just to give you some idea...
Profit £200,000 / 19 years = £10,526 p.a
Then multiply that figure by the number of years as your PPR (13) plus the last 18 months of ownership (even if rented so 1.5)
14.5 x £10,526 = £152,627 which you then deduct from £200,000 = £47,373 less £40,000 lettings relief leaves £7,373 which is within your £11,000 annual CGT allowance.
Nothing to pay!
Thank you Anotherjohn.
I will do the calcs to include actual values capital improvements, but that's good news. That means of my two rentals and home, only one will be subject to CGT of any significance.