Tom C
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11 Posts
Hi,
I'm trying to work out if selling a rental I own makes sense and the Key issue I have in making the decision comes down to CGT.
in a nutshell I have a property that doesn't fit into the types of rentals that I want to own. it worth too much (£140,000) and I have enough equity in in to sell and be in a position to purchase two instead at £70k which is where I want to be. Annoyingly I cant just borrow more against it and do it that way as the rental income once stress tested does not allow me to borrow more against it.
so down to the Question...
I Paid £90k for the house in 2014 (that I bought jointly with a friend) - 18 months ago I bought him out for the equivalent of £110,000 - I paid him out £30,000 which was his half of his original deposit back plus growth in the property. Its since gone up in value to the £140k and isn't local hence the want to sell.
To work out the £30k I paid my friend. the calculation was that we owed £50k on the mortgage at the time and the house was worth £110k so I paid him half of the equity hence £30k back to him.
To make this simple lets say that there are no other cost associated that are CGT Deductible.
how do I work out the calculation on this? because on the gov website it read as though my half of the original purchase price is £45k then add the £30k I paid him out and I have to pay CGT on the difference from £75k to £140k which doesn't seem right.
alternatively my half of the house that I paid £45k for (£90k divided by 2) originally plus the £55k that I technically bought the second half for (£110k divided by 2) totals £100k.
at this point it makes sense to sell as I then pay CGT on the £40k minus the £12.3k exemption and i have enough money left over to mortgage two houses.
My concern is that because I bought him out and it was just a transfer of equity not like a proper sale I cannot for the life of me work out what to do?? any accountants or people in the know or gone through the same have any clues?
