Buy to Let- Capital Gains Tax Question

mik1973 · Nov 8, 2007

Read an article from Fool.co.uk which highlights the benefits of opting for interest only when purchasing BTL property.
It mentions that CGT may be potentially be reduced if using interest only. I'm trying to get my head around this one.
If i purchase a property for 100k and it increases in value to 150K. My CGT liability would be 50k (minus any personal allowances etc)
If i made capital and interest payments I would receive more than 50k (as i would have paid some of the capital off and can assume that this would not be taxable) so either way i would only be potentially taxed on the 50k no matter what method i used?

Also if someone does decides to use capital and interest to pay for a BTL can they still off set the interest element against rent?

Cheers,

Mick

Hoggums · Nov 8, 2007

mik1973 said:
Read an article from Fool.co.uk which highlights the benefits of opting for interest only when purchasing BTL property.
It mentions that CGT may be potentially be reduced if using interest only. I'm trying to get my head around this one.
If i purchase a property for 100k and it increases in value to 150K. My CGT liability would be 50k (minus any personal allowances etc)
If i made capital and interest payments I would receive more than 50k (as i would have paid some of the capital off and can assume that this would not be taxable) so either way i would only be potentially taxed on the 50k no matter what method i used?

Also if someone does decides to use capital and interest to pay for a BTL can they still off set the interest element against rent?

Cheers,

Mick

Not something I'm aware of - but if you can do it - live in your BTL for >6months - then you don't have to pay any CGT as it's classed as your home.

mik1973 · Nov 8, 2007

Cheers Hoggums. I'm aware of how CGT can be reduced (with ref to living in property before sale) but still can't work out the Interest Only benefit.

Mick

combotrader · Nov 19, 2007

Hoggums said:
Not something I'm aware of - but if you can do it - live in your BTL for >6months - then you don't have to pay any CGT as it's classed as your home.

and let out your main residence for that period of time....

belflan · Nov 25, 2007

my understanding is if you have lived in the property before you let in out it is free of CGT, but only if you sell it within the first three years.

after this you get a letting out allowance which reduces the taxable gain by £40K. (as long is your lived in it as with the above)

if you hold the property in joint names (eg. you and your wife) the allowance is £80K

i don't believe there is a minimum time peroid (6months?) as above. As along as your can prove you lived there (bills, voting reg. etc)

Buy to Let- Capital Gains Tax Question

mik1973

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Hoggums

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mik1973

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combotrader

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belflan

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