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selling house and not rebuying

sassie Avatar
banned7y, 11m agoPosted 7 years, 11 months ago
do you have to pay anything if you are pocketing the cash, like a tax payment on the money made
sassie Avatar
banned7y, 11m agoPosted 7 years, 11 months ago
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#1
No tax if you sell your mail or only residence, capital gains tax is paid on other properties you may sell.
#2
That would be maiN and or only residence.!
banned#3
I thougt if it was over a certain amount or something there would be something to pay, so if i bank the profit all thats paid is tax on the interest?
#4
sassie
I thougt if it was over a certain amount or something there would be something to pay, so if i bank the profit all thats paid is tax on the interest?


I believe so, but would be best to ask the tax office.
#5
Capital gains tax is only paid on investment properties, IE if you live in and own one house but also own another you will pay tax on the second property should you sell at a gain, not your main or only residence/property .
#6
It's highly possible it may be classified as "Income" and as such you would be subject to tax at the usual rates but I'm not a tax lawyer
banned#7
i dont pay tax, so probably wouldnt pay tax on interest, we havent got a local tax office and whenever i phone i get all tongue tied so thought ide ask on here first, but deffo would have to check when it happens obviously
#8
You will pay tax on any interest you earn if you bank the capital but that applies to any savings you have if not in a tax free account.
#9
ms2005
It's highly possible it may be classified as "Income" and as such you would be subject to tax at the usual rates but I'm not a tax lawyer



No tax is payable on capital gain of selling your main or only residence.
#10
There was a thread on MSE before the Iceland banks all fell over about selling up and renting, using the interest to pay the rent (the rate back then was 7% !!). There should be no tax payable (other than the interest on the capital).
banned#11
ok thanks guys, i dont know why i was thinking there was something to be paid if i didnt rebuy
#12
sassie
ok thanks guys, i dont know why i was thinking there was something to be paid if i didnt rebuy


The only time you would have to'pay' something is if you held a mortgage product which had fees attached to it for early settlement.
1 Like #13
I can confirm that Ginner is right. You will not pay tax on the sale of your 'home', only on the sale of a 2nd, or other investment property.

You will pay tax on interest, but like everyone you have a personal tax allowance which might be 6k or more. This means that until the interest reached that amount (including other investments) you don't pay tax. With current interest rates you would have to invest a lot before you paid tax.

see here:http://www.hmrc.gov.uk/rates/it.htm
#14
Ginner
No tax is payable on capital gain of selling your main or only residence.


Income tax is completely different to Capital Gains tax, the purpose of not CGT on the sale of your house is to prevent market stagnation, if you then choose to withdraw from the housing market this money is no longer a gain and may indeed be counted in your annual income assessment.

Paidia
I can confirm that Ginner is right. You will not pay tax on the sale of your 'home', only on the sale of a 2nd, or other investment property.

You will pay tax on interest, but like everyone you have a personal tax allowance which might be 6k or more. This means that until the interest reached that amount (including other investments) you don't pay tax. With current interest rates you would have to invest a lot before you paid tax.

see here:http://www.hmrc.gov.uk/rates/it.htm


Tax free amount currently stands some where around £5,225 and is annually incremental based on inflation but if you have a job this £5,225 is already swallowed as your allowance.

Any interest would most certainly come under "top slicing" rules so everything is considered first before they tax your interest so if you break the 40% category in income they they classify the interest at 40%
#15
ms2005
Income tax is completely different to Capital Gains tax, the purpose of not CGT on the sale of your house is to prevent market stagnation, if you then choose to withdraw from the housing market this money is no longer a gain and may indeed be counted in your annual income assessment.


Incorrect.
#16
http://www.hmrc.gov.uk/cgt/property/basics.htm

Capital Gains Tax on property: the basics

You usually don't have to pay Capital Gains Tax when you sell, give away, exchange or otherwise dispose of your own home. But you may have to pay Capital Gains Tax when you sell or dispose of a piece of land or a property that's not your main home.


Selling your own home

You don't have to pay Capital Gains Tax when you sell or dispose of your home as long as all of the following apply:
[LIST]
[*] it was your only home for the whole period you owned it (ignoring the last three years you owned it)
[*] you used it as your home and nothing else all the time you owned it
[*] for the whole period you owned it, you didn't let any of it out or didn't have more than one lodger
[*] the garden and area of grounds sold with it, including the site of the house, is no more than 5,000 square metres (about the size of a football pitch)
[*] you bought it - and made any improvements to it - to use as your home rather than to make a gain[/LIST] If you meet all these conditions you're entitled to Private Residence Relief and won't have to pay Capital Gains Tax.
#17
ms2005
Income tax is completely different to Capital Gains tax, the purpose of not CGT on the sale of your house is to prevent market stagnation, if you then choose to withdraw from the housing market this money is no longer a gain and may indeed be counted in your annual income assessment.



Tax free amount currently stands some where around £5,225 and is annually incremental based on inflation but if you have a job this £5,225 is already swallowed as your allowance.

Any interest would most certainly come under "top slicing" rules so everything is considered first before they tax your interest so if you break the 40% category in income they they classify the interest at 40%


Tax free personal allowance currently stands at £6475 for the tax year 2009/2010.
You pay tax at whatever rate once you have earned that, if you sold your main or only residence in that tax year and did not buy anoher house you will only pay tax on the interest your capital earns.
#18
Ginner
Incorrect.


What? Income tax is income tax, CGT is GCT they are not one and the same.

Ginner
Tax free personal allowance currently stands at £6475 for the tax year 2009/2010.


I accept that, my statement was based on when I last had to deal with Tax. My apologies for that but the above is still correct
#19
ms2005
What? Income tax is income tax, CGT is GCT they are not one and the same.



I accept that, my statement was based on when I last had to deal with Tax. My apologies for that but the above is still correct



Capital gain from the sale of property if it is you main or only residence is not income, the interest you may earn from investing that capital is income.
#20
Ginner
Capital gain from the sale of property if it is you main or only residence is not income, the interest you may earn from investing that capital is income.


I'm not saying it is I said the sale money might be classified as income if you don't put it back into the market as sually you need some form of relief to avail yourself of paying tax such as roll over relief, what I was saying is that Income tax is not Capital Gains Tax which is what I understood you were saying from your posts.

Chalk it up to crossed wires shall we
#21
Also, shop around online for the best interest rates for your capital in Which magazine or moneyfacts. If the banks aren't giving you the best , they are charging you the difference!!! Depending on income, you may be eligible to receive the interest gross (without tax being deducted by the bank) This may help http://www.hmrc.gov.uk/helpsheets/2007/r85-helpsheet.pdf
#22
ms2005
I'm not saying it is I said the sale money might be classified as income if you don't put it back into the market as sually you need some form of relief to avail yourself of paying tax such as roll over relief, what I was saying is that Income tax is not Capital Gains Tax which is what I understood you were saying from your posts.

Chalk it up to crossed wires shall we


Sorry never heard of roll over relief and no one has to buy another property to avoid tax on the capital gain they make from selling that property, income tax and cgt are as you say two completly different things and are not connected when selling your main/only residence.
#23
Ginner
Sorry never heard of roll over relief and no one has to buy another property to avoid tax on the capital gain they make from selling that property, income tax and cgt are as you say two completly different things and are not connected when selling your main/only residence.


Roll over relief is nothing to do with selling houses it's used to defer a tax payment when selling shares in a company the proceeds of which are invested in a Qualifying Asset - The point was just to illustrate the need for some for of relief in general terms to defer / avoid paying some form of tax.

As stated domestic tax is not what I do, I only deal with corporate / commercial investments I was just trying to illustrate an example
#24
ms2005
Roll over relief is nothing to do with selling houses it's used to defer a tax payment when selling shares in a company the proceeds of which are invested in a Qualifying Asset - The point was just to illustrate the need for some for of relief in general terms to defer / avoid paying some form of tax.

As stated domestic tax is not what I do, I only deal with corporate / commercial investments I was just trying to illustrate an example



Fair enough and you will well know corporate and private taxation is worlds apart, I am involved only with private and personal taxation and thank you for your input.:)
#25
A slightly different point......
Any large amount of cash should be 'banked' wisely right now. Worth splitting between different banks/bs's to ensure that if the institution got into difficulties your money would be safe. Just imagine selling your house and then losing your money. MSE gives a list of the banking institutions and who owns who. Making it possible for you to spread any risk and/or ensure you are covered if the bank gets into trouble.

This would also apply if anyone is 'lucky' enough to get a large redundancy payment right now.
1 Like #26
WoolyM
A slightly different point......
Any large amount of cash should be 'banked' wisely right now. Worth splitting between different banks/bs's to ensure that if the institution got into difficulties your money would be safe. Just imagine selling your house and then losing your money. MSE gives a list of the banking institutions and who owns who. Making it possible for you to spread any risk and/or ensure you are covered if the bank gets into trouble.

This would also apply if anyone is 'lucky' enough to get a large redundancy payment right now.


OOhh, can I join in the debate?

In theory, this is correct. In practice, who can say?
-You only need to consider this if held in sole name, AND have over £50k in deposit accounts with a single organsation or combination of organisations who share the same Deposit Compensation Scheme licence AND if you are not prepared to consider alternatives for you money at a time when interest rates are heading towards 0%.
-There is more than one deposit compensation scheme i.e. there is an investment compensation scheme (no, investment doesn't mean you have to take a risk with your capital) which protects 100% of the first £30k, and 90% of the next £20k; an insurance compensation scheme etc. These are all independant of each other, and per person.
-A couple can quite easily have over £200k with one organisation and have the majority of it protected if they structure it correctly. Also, this can be more tax efficient as it may use a combination of both income tax & CGT allowances.
-Spreading cash around different organisations can actually INCREASE the risk to your savings, as you may be taking some out of a financially sound organisation and putting it in one more likely to face difficulties (How many people thought they were 'protecting' their savings when moving it to IceSave)
-Although the protection schemes exist, govts may not back up the guarantee (again - see the IceSave example, where our Govt had to step in)
-In practice, the UK govt is very unlikely to let any private saver loose money in a UK bank collapse, hence full nationalisation of Northern Rock, part Nationalisation of many others.
-If you do decide to be blinkered to the £50k savings limit, what happens when the interest you earn takes you over - do you move it on again?
-Not all interest rates are the same. Again, what is your preferance? £100k at 3%, or £50k at 2% and £50k at 1%?
-Is it practicle? Consider if you have ever had to sort out a deceased's estate. Would you prefer to deal with 1 organisation, or 4 or 5?
-In these ever changing times, how many times do you move the money, e.g. how many savers moved money from HBOS to Lloyds, only to see them merge later, same with Scarborough & Skipton, Abbey & Bradford & Bingley, Co-op & Britannia - and with a recession, mergers & takeovers will continue in order to survive.

Even Mr Lewis has said on TV it's not practicle to hold savings in too many organisations. Always take proper financial advice, and where your life savings are concerned, keep an open mind and don't just have a knee jerk reaction.

Ask yourself what you want from the money - short term deposits/savings accounts are fine for emergency funds & day to day spending, but not the place for over a longer term need, especially with falling interest rates. (IMHO) Everone's needs are different, there isn't a 'one-size-fits-all' solution.

P.S. reading back through this thread on CGT and profits from selling a main residance, Ginner is right.
banned#27
Thanks again everyone, there will be alot of money to invest so will be looking into that once house is on the market, i knew about the tax on interest but thought ide have to be something for not rebuying, so thank you all x

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