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Will I Be Liable for Capital Gains Tax (CGT) on the Income from Let Property?

Question


I am exempt from paying tax on my income as I am a non-UK resident. I will soon be renting out my UK flat which currently has an interest only mortgage on it. If I was to use the extra income gained from the rental to make capital overpayments on that mortgage, will I be liable for CGT even though I’m putting it back to reduce my mortgage?

Arthur Weller Replies:

There is no liability to CGT unless you sell or give away (dispose of) the property, so that there is a change in the beneficial ownership of the property. When you make capital repayments on a mortgage there is no disposal of the property, so no CGT is triggered. See page CG12700 of the HMRC Capital Gains Manual: http://www.hmrc.gov.uk/manuals/cgmanual/cg12700.htm

Property Tax Insider This sample question and answer is taken from Property Tax Insider, a monthly UK tax saving magazine for landlords and property investors.

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