Recently we were asked about we could help a client with a second property that was being let and was about to be sold. The following is a summary of some of the points involved.
We helped the client to identify and keep records of all relevant costs so that they can minimise their tax liability on the annual income and eventual sale. These included:
- The initial costs and legal fees
- Improvements costs
- We discussed whether it was a furnished property to determine whether wear and tear allowance is claimable
- We discussed repairs and renewals and maintenance (note for unfurnished property there are restrictions on claims for certain types of repairs)
- Mortgage interest arrangement fees
- Mortgage interest costs and maximum mortgage value claimable.
- Mortgage costs for separate deposit funds perhaps borrowed on their own house
- Letting agents fees
- Travel to inspect the property
- We discussed what would happen upon the eventual sale of the property and the capital gains tax calculations and tax reliefs for periods when the property may have been lived in by them as owners, plus the last 18 months of ownership and the extra lettings exemption relief calculations, all of which would reduce the potential capital gains tax liability.
We gave the client an example of the tax savings we had made for another client who had sold their property. That client had purchased the property in 1986 for £65,000; they had spent some £70,000 in improvement work and had lived in the property for a few years. It was then let until it was sold for £645,000. We were able to save them £66,000 in capital gains tax based on what they thought would be tax payable!
Call us if you have a let property or you are selling a let property so that we can help minimise your tax liabilities