autosketch buying Lynda asks: “I wonder if you could advise me if there would be any tax to pay if we sold a buy to let property and invested money into another property as a buy to let.”
Q&A 85 – Selling To Buy More Property – Shownotes
I wonder if you could advise me if there would be any tax to pay if we sold a buy to let property and invested money into another property as a buy to let.
After clarifying with Lynda that her property (and herself) were in the UK, I only really had bad news for her in response to this question.
Capital Gains Tax
You see, when you sell a buy-to-let property in the UK, you are subject to capital gains tax and the buyer will be subject to stamp duty tax (which will now be at a higher rate if the sale occurs in, or after, April 2016).
As regular listeners will know, we get a lot of capital gains tax questions, so if you need help calculating your tax liability Lynda, check out this link to our main capital gains tax article.
When discussing the selling of one property, and buying of another property with the proceeds, there is such a thing as “rollover” relief in countries such as the USA. This allows the seller to state on their tax returns that the proceeds were used to buy another similar property and therefore you are able to roll forward those gains until when you sell that next property and pay the taxes all at once at the end.
This seems like a fairly sensible approach, but unfortunately for us in Blighty, there is no such rule in the UK.
Sorry that I don’t bear better news Lynda, but hopefully having that knowledge will help you shape your tax and investing strategy with your buy-to-lets.
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