Would I lose out?

[alinaqvi90]

Hi guys
I am a first time buyer and will buy a property in or around London area in the next month or two.

At the moment I am travelling a lot for work and I have my family home therefore would not need that property for accomodation in the near future.

My question is:
If I buy an investment property as a first time buyer what benefits would I loose out on?

thanks in advance

[brian]

The main loss is that if classed as an investment property - ie, Buy To Let mortgage - then you'd be charged capital gains tax on any profits.

Really, if you're buying a property for the first time, then the tax system is entirely on your side in terms of buying a home as opposed to an investment.

[alinaqvi90]

Originally Posted by brian

The main loss is that if classed as an investment property - ie, Buy To Let mortgage - then you'd be charged capital gains tax on any profits.

Really, if you're buying a property for the first time, then the tax system is entirely on your side in terms of buying a home as opposed to an investment.

Would I be charged CGT even if I pay all the money from rent towards mortgage. E.g. if monthly mortgage payment is £900 and rent is £850/£900 ?


thanks

[IFA]

Hi there,

You are confusing Capital Gains Tax with Income Tax.

In very basic terms: If you are making a monthly profit from renting a property then you should fill out a tax return at year end to declare your profits and pay income tax just as if you were making that money from employment, Capital Gains Tax however is paid on the increased value of an asset when sold (or when it's status changes and it is no longer an investment property if you take up residence yourself) so you would only be liable for CGT on resale of the property if the value has increased from when you purchased it.

I'm not a tax adviser but from what I understand there are tax reliefs that can be claimed against CGT depending on how long you've owned the property, and for income tax purposes you can offset various other costs to reduce your profits (letting agents fees, yearly gas safety check costs, maintenance costs etc) but you can only offset the mortgage interest against your rfental income and not any capital element of your monthly mortgage payment if you have a repayment mortgage.

[Dan S]

Don't forget you'll also miss out on your stamp duty exemption as a first time buyer.