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Property Tax Myth……Mortgages reduce exposure to Capital Gains Tax

Income exceeding £60,000 results in the complete clawback of child benefit, with the £50,000 threshold unchanged since 2012 impacting a growing number of families.

Capital Gains Tax

When you sell a house, Capital Gains Tax (CGT) is calculated on the difference between the sale proceeds and the purchase price plus any capital improvements, inclusive of any legal fees.

Principle Residence Relief

If the house was your home for the whole period of ownership, you should be able to claim Principle Private Residence (PPR) relief which will mitigate the gain, and remove any liability to CGT.

Annual Exemption

However, if it was not your home for the whole period of ownership, you will need to assess how much of the gain is taxable, before applying your annual exemption.

Mortgage Charge

Whether the property has a mortgage charge or not is irrelevant, unless the purchaser takes on the mortgage from the seller, which is rare and actually just forms part of the agreed price (loan instead of cash).

Settling your Mortgage

Having a mortgage to settle when you sell a property may affect your decisions and most certainly your cash flow management, but it has no impact on the CGT liability, which by the way, usually has to be declared and paid within 60 days.


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