Tax Tip: July 2016

Tax Tip: July 2016

The next time you move house, you could let out, rather than sell, your old home so that the rent covers the mortgage interest and other expenses.

When you eventually sell this property, the proportion of the gain relating to the period when it was occupied as your main home will be exempt from tax. In addition, you can claim a further tax exemption of up to £40,000 per owner because the property has been let. With the benefit of all these reliefs, you might find that the gain on the let property is less than your capital gains exempt amount (£11,100 for 2016/17), and is therefore tax free. Any remaining gain will be subject to CGT.

Be warned that retaining your old home will result in an additional 3% rate of stamp duty being payable on the purchase of the new home and you could see your tax relief for mortgage interest restricted to a rate of 20% from 2017/18 onwards.

 

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