When you sell an investment property, it can be more complicated than selling your home, particularly if you have tenants in the property or if it means that you will be liable for Capital Gains Tax.
If your property is tenanted, the first thing you need to do is to decide whether to sell with the tenants in situ, or to serve notice on them and sell a vacant property.
Selling a vacant property
By asking your tenants to leave, you open the market to everyone. If you sell a property with tenants in it, you can only sell to other buy-to-let investors, which may impact negatively on the price you are able to achieve.
Once the tenants have left, you may wish to do some work to make the property more appealing. Remember that in the time between the tenants leaving and the completed sale you won’t have any income. This could potentially be many months, so make sure you can cover any mortgage payments due during this period.
Selling a tenanted property
The buyer will need to see copies of all of your landlord documentation, including the tenancy agreement, Right to Rent records, gas safety certificates and any inventory. The deposit will need to be transferred to the buyer’s chosen tenancy deposit scheme.
It is a good idea to put a conveyancer in place as soon as the property is put on the market, so that you can work with them to collate the necessary documentation ready for any sale. A buy-to-let investor may well be able to move much more quickly than an ordinary buyer, so it pays to be ready with all of the information their solicitor is likely to need.
Capital Gains Tax on a rental property
If the property you are selling was not your main residence or you were renting it out, then you could be liable for Capital Gains Tax, even if it has been your home in the past.
If you left more than nine months before the sale, then Capital Gains Tax will be payable.
The taxable gain is the sale price less the amount you paid for the property. Expenses including Stamp Duty, estate agency, selling and legal fees and the cost of property improvements can be deducted from the gain.
There is a Capital Gains Tax allowance on property, currently of £12,000, meaning that the first £12,000 of gain is exempt. HM Revenue & Customs add the Capital Gain to your personal income to calculate the amount you will need to pay.
If you are thinking of selling a property and would like to speak to one of our expert lawyers, ring us on 0345 2413100 or email us at mail@cplaw.co.uk.
