Singing Pig

Hi all,

Wonder if you can help me out?

 I have a buy-to-let property which I have owned for 6 years. The house has significantly increased in value so I am going to remortgage to release £20k in order to expand my property portfolio.

Can you tell me if there are any tax implications (for example CGT) that may affect me?

 

Thanks for any help you can provide!
 

You only pay CGT when you sell an asset, as your remortgage will be a 'loan' then as far as I know there will be no tax to pay. However, rememeber that if and when you do sell the property the tax will still be against the difference between the sale price and the original purchase price, not the difference between the sale price and outstanding mortgage amount.

Thanks!

What Gary said is correct -  CGT is only payable on disposal, and mortgages/loans are not relevant to the CGT calculation.

You can only claim the mortgage interest as an expense of the lettings upto the value of the property when you first let it. So if this extra borrowing takes the mortgage above the property value when first let, you cannot claim the interest as an expense.

 Of course, if you use the money to invest in more property then the mortgage interest will be a legitimate expense once more as there is another property in the equation.

What about if you use additional mortgage funds to improve a property? I would think that this is an allowable expense.

susan_mary:

What about if you use additional mortgage funds to improve a property? I would think that this is an allowable expense.

Yes.

Also, remember that all UK rental properties are treated as a single business - although it is necessary to maintain separate accounts for Furnished Holiday Lettingss and uncommercial (e.g to family members etc) lettings. 

I never knew that. That was going to be my strategy  for reducing my CGT on my properties. Is there no way to get round this or is it just a case of biting the bullet.