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Hi again you clever people!

My former PPR is now let. Purchased 2001 for £48000. I lived in it for 4 years. I introduced it to letting business this year and had it valued at £127500 at that time.

If I have the property remortgaged in around 5 years to £127500 (which will hopefully be possible in 5 years with a bit of sensiblehouse price inflation) and then sell, will my CGT be calculated as sale price - mortgage owed?

Put another way, can I withdraw the business capital (current MV - original purchase price) and place it elsewhere, and thus when selling up minimize my CGT liability?

Thanks in advance.

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Hi Anthony

These are two separate issues here and they are not really connected.

1. You can withdraw the capital and do whatever you like with it... buy a fancy car if you like! The key is that you can deduct interest on capital up to the value at first let, namely £127500

2. CGT - If you sell the property, broadly you are looking as the following calculation:


Less Original Cost

Less: Improvement Costs

= Total Gain before Relief

Less: PPR exemption (*see below)

Less: Lettings Relief (**see below)

= Total Untapered Gain

Less Taper Relief

= Gain

Less: CGT Annual Exemption

= Total Gain Chargeable to tax @ 20% or 40%

*PPR exemption - you will be entitled to 4 years (as it was your PPR), plus the last 36 months of ownership - therefore sell within 7 years = no CGT. Sell after 7 years and the exemption starts to dilute the longer you own the property, eg 7/8, 7/9, 7/10 etc

**Lettings Relief - available by virtue of the fact that you have rented out a property that was once your PPR - up to a maximum of £40k per owner - based on tle lower of a) PPR exemption received, :) gain left in charge and c) 40K (so if you are married and the property is in your sole name, consider putting in joint names pre exchange to sell - thus getting two lettings exemptions instead of one)

Taper relief - available for ownership periods exceeding 3 years post 5 April 1998. ownership of 3 years = 5% discount, 4 years = 10%, and increases by 5%for each complete year, up to a total discount of 40%

Annual Exemption - currently £8800 per year - again, if in joint names - possibly have doubled up this exemption

All in all there are plenty of exemptions available to you. However, the size of your mortgage has no impact on your CGT liability

I hope this helps



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