milo

good morning all

so im relocating for work soon. its unlikely i'll be able to sell my house and buy a new one in the 4 weeks ive got to start work there (its 3-4 hours each way so a commute is out of the question). so that leaves me with two options:

* rent a place until my house is sold, and then find one to buy (or keep renting)... but this means paying a mortgage AND paying rent for an undetermined period of time.

* rent out my house (i.e. dont sell it) and rent a house in the new area. so in effect i still have property, but am not living in it. but what are the tax implications? will i get taxed on the rental income from my house, even if its merely paying for rent on another? and will i get taxed if i do sell my house as it could be argued that its not my "main residence" if someone else is renting it?

any advice (including other options) appreciated

cheers!

LG John

Sell your house and take all the money to the casino. Place on red or black for one spin and you have a 50:50 chance of having two homes (problems solved) or being homeless (these things happen)

milo

you still dont get it... it's not a 50:50 chance because the house will get 0

still, i'll put that as option 3, thanks

Brendan Hughes

@ Kenny!

LG John

I do get it, it was just easier to type 50:50 than the actual odds Your such a purist

milo

*YOU'RE*

oh, the irony

LG John

I rest my case

OllyK

Yes your earnings from the rented property will be liable for tax, after deductions for repairs etc.

I won't go in to the pro's an con's of renting out your own house, but mine made enough to cover the mortgage and keep me in petrol for 4 years when I went back to uni (moved back in with parents so other costs were low).

Personally I'd be tempted to put it on the market asap. House prices in Cambridge are grizzley, but get out a bit and they are not so bad. I used to commute from Loughborough to Cambridge for 3 years (90 miles each way) rather than move there. The traffic on the A14 is terrible and to be avoided!

Depending on where you live and the house you have, the market isn't too bad at the moment. Houses round me are selling in 48 hours at the moment for the asking price.

milo

did that also mean you were subject to capital gains tax when you sold your house? or did you move back into it rather than selling?

i am going to take your advice and get it on the market asap, thanks

OllyK

I haven't sold the house as I moved back in to it. AFAIK, unless you buy a second home, when you sell the first you are only due for the usual stamp duty and costs etc.

Brendan Hughes

Rent it out, rent a hovel for a year, save up your profit, use it to put a deposit on a new place where you work, and presto! Two houses.

Not sure if this has any higher likelihood of working than SB's idea though...

Brit_in_Japan

If you sell you main residence (or a house which was your main residence) then you are not liable to CGT. Rental income is treated as taxable income, but you can offset some of that as wear and tear on things you leave in the house, carpets etc. Not exactly sure what you can offset, ask an accountant.

If you let your house out, you will have to offer a tennent an Assured Shorthold Tenancy, which will be for a minimum of 6 months. You won't be able to sell your house with a sitting tenant and you cannot get a tenant to move out within the six month period (unless they break the terms of the agreement, and then it's not easy). How does this fit in with your plans ?

You don't have to let the property via a letting agent, but it makes it easier to do so. But they will charge somewhere between 10 and 12% of the rental value for the service. You need your mortgage lenders permission to let your house out. You will need landlords property insurance (your existing insurers will probably not want to know). If you get a good tenant (which I have), no problems and rental income after deductions is still more than my mortgage. If you get bad tenants (as a friend did) can be a headache.

HTH.

gareth123

It's not quite that straigthforward, you have to have used it as you main residence during the last three years.

I've twice rented out a UK house while living abroad. When house prices are climbing it's great, some mug pays the mortgage while you keep the asset. I used a property management company both times, one was ok and one was the most godawful bunch of lying tosspot estate agents on the planet. Although I've since sold my UK property because the market there is about to go **** up big time.

workshy_fopp

Good advice from Brit in Japan. I wiil only add, that if you are going to rent it out, then get moving NOW. Get a reputable agent to manage it. The sooner you get it rented the better, one months lost rent would cover the agents fee for the year.

Corgi

No it is not, it never has and never will, long term of course.

House prices in the UK have doubled, on average, every 10 years since WW2.

gareth123

Sure, over time, blah blah, on average, blah blah, wouldn't you rather have dumped Microsoft stock in December 1999 rather than wait for it to, over time, on average, make it's way back up to $60, eventually?

The housing market in the UK needs a correction. It's going to happen this year. Last house I sold there, and it wasn't a stunning house, I would not have able to afford a 90% mortgage on at the selling price, which is nuts. Too many people are way, way overextended on their homes and it's going to come crashing down was the interest rates rise....

Feel free to quote this Jan 2005

RON

Not totally relevant to this thread, but a question for those that know,
I used to live in one house, and then built another, have now moved into the new one, and the old ones been on the market for 10 months, so, even though it was my main residence, it's not now, so would I be liable to CGT???

Please say no!!

Ron.

gareth123

No.

You have three years before it is liable for CGT.

milo

so what you're saying is i should sell my house and rent for a while?

what evidence do you have to suggest that it's going to happen this year?

Brit_in_Japan

RON, you should get an accountant to confirm this, but I think that if you move back into your old residence, even if only for a week, I believe the 3 year CGT clock gets reset and you then have another 3 years in which to sell. I don't think there is anything currently which prevents you from moving between "main residences" on a 3 year cycle so resetting the CGT clock and avoiding CGT on them all if you sell within the 3 year residence period.

Howee

I thought the period of time before CGT hits was 4 years I'm renting out my flat in London and this is what I have been led to believe by my agents.....

If you rent a property out and it ceases to be your main residence then you will be liable for CGT on any profit made on the value of the property after 4 years or whatever the time frame is (I'd better check...!). If you move back in (for a minimum 6 months) within this 4 years the clock gets reset. In other words, you don't get taxed on the value of the property prior to this date, just the profit made between then and when it gets sold.

Also any rental income that remains after the mortgage and bills on the property have been paid will be taxable at whatever your income tax rate is. I don't have a mortgage on mine so I try to pump as much back in to home improvements as I can as this should add value to the flat, and it's tax free!!

Whatever you decide, you need to get the ball rolling quickly if you want it rented as soon after you relocate as poss. You'll be surprised at what you need to do to satisfy your landlord obligations (unless you want students or DSS).