gigi1

Can anyone help answer this please? We have been out of UK over 5 years and are thinking about buying a property to rent out. would it be better to buy in cash or take a small mortgage? we are thinking about capitol gains tax? any advise or experiences much appreciated.

lionheart

What does capital gains tax have to do with getting a mortgage? Am I missing something here?

Roadking

capital gains tax is a tax on capital gains, you buy at one price and sell for another at a later date and may qualify for tax on the "gain".

A mortgage may help with offsetting any income you generate from rental, as the rental income would be taxable provided it exceeds your allowances.

But then, I'm not an expert so ignore all I said as it's probably wrong. Meow will tell you provided you don't get sarky or challenge her knowledge, 'cause she does actually know what she's talking about...even if she is, according to Bahtatboy, in to bondage.

The Dean

It was Meow that got me interested in bondage............

mission

from my understanding, although i ain't a tax accountant...capital gains tax is only applicable if you have more than one property and you sell that property and hence you pay 40% tax on the 'profit' value of that property.

For buying a property, capital gains tax has nothing to do with it.

although i could be talking bollocks as well

Bijilo123

The latter probably. If you are a UK resident you pay tax on the Gain which is not the Profit - this applies to a house which is not your main residence.

If you are an overseas investor you pay CGT on all of your UK properties (and maybe foreign properties too??).

Getting a mortgage to buy a house in the UK would be an interesting challenge for a foreigner or non-res.

If you are British then you have the personal allowance to offset rental income and can claim costs to reduce the profits. The op would be advised to register as a non resident landlord.

mission

BIJILO, definitely agree with the latter part of your post...im a brit and have rented out my property in the UK and if your rental income exceeds your mortgage repayments plus any other expenses associated with the property and the net result is more than your standard tax allowance for the yr, then one pays tax on the balance over and above the tax allowance.

Also my bad, you are correct, the CGT is only applicabel if you sell your property that isnt your permanent residence.

Meow

Jeez - I could weep. Why do people insist on offering advice even if they haven't a clue??


gigi1 - If you have been non-resident for a full 5 tax years you will not have liability to CGT. If however, the property is let you would be subject to income tax on the rental income. Mortgage interest payments could be offset against rental income.

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gigi1

Thank you for all your advise,especially to you Meow. I think we will organise an expat mortgage and go from there.

Bonny Boy

The OP appears to be buying a property to rent out. It will not be her/his 'residence'.

Be aware that CGT exemption is only for your main 'residence'. If you only own the property, even if it is your only one, you are not necessarily exempt on CGT if you have not lived in it. As ever, the rules are a bit more intricate, so you need to research your particular situation or get specialist advice.

Also, CGT is now at flat rate 18%, no longer 40% with taper.

HMG budgets have a way of changing the rules of course, and given how things are at present, Darling will be looking for money any which way.

The 5 year non-res CGT exemption means careful planning required before you resume residency after 5 + yrs non-res. For example, 'bed & breakfasting' of assets (sell, then buy back) so you take any gain whilst still exempt from CGT just before you return. Again, get specialist advise.

Meow

The OP stated that they are long term non-resident so they will not be liable to CGT whilst they remain non-resident. The rules for UK residents are different.

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Bonny Boy

Agreed - What I was attempting to say is that if you buy a UK property whilst overseas, then return to the UK (becoming Resident at that stage) and decide to sell fairly soon after, to live elsewhere for example, then even if it is your only property, you will not be exempt CGT, because you have not lived in it.

You would have to live in the property for a time (complicated rules) before you could get the CGT exemption as your only residence. Therefore, the return home must be carefully planned, with specialist advice taking into account your circumstances.

Meow

Of course, and that's precisely the specialist advice that I give to people....

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Bahtatboy

She never responded, you know. Too embarrassed? Lost for words? Or above snide remarks? I'll take the no respnose as an admission, but there again she's probably dismissed us as silly little boys trying in vain to poke fun. I think we should be tied up and flogged...

Patsy Stoned

........ I'll get my whip!