Buy to let property, should I sell ?

[CW1]

Hi,

In Dec05 I moved from the house I'd been living in for over 15 years and, rather than sell it, I got a buy to let interest only mortgage for 80% of the value, for �72k more than I'd originally paid for it (overall increase in value was over �100k).

The same tenant's been living there since Dec05 but isn't always on time with the rent. Been thinking about possibly selling in Dec08 when the 3 year fixed rate is up as the likely hike in mortgage payments won't be covered by the rent, even if I increase it (which I haven't since day 1), and I'm getting fed up chasing the rent (long story !).
I know house prices are supposed to be going down but there still seems to be a small increase in value since Dec05 (rightmove.co.uk), so I'd probably walk away with around �30k. Before CGT !
I'm confused as to what figure the 18% tax would be based on - price I originally paid in 1990 (though I bought 75% to start with, with a mortgage, and the remaining 25% 3 years later, in cash, so 2 prices !) ? Or the value in Dec05, when I started renting it out ?

The area's being regenerated so long term the value would go up, but is it worth me having to possibly subsidise the mortgage but lose more in CGT and keep prodding the letting agent re getting the rent paid on time ? Or is it true that CGT doesn't become payable until the property's been let for more than 3 years, in which case maybe I should sell ?

I need to do some hard thinking but would appreciate some advice ... please !

[bednobs]

i think its based on the profit you have made - ie 30, 000

[Eve]

This may help..

http://hr.bkl.co.uk/printable/capital_gains_ta x_issues_on_selling_tenanted_investment_proper ty_717.htm

[Eve]

Remember you can get some relief for the time it was used as your residence.

Some more useful links....

http://www.capitalgainstax.org.uk/article.html

http://www.landlordzone.co.uk/tax/capital-gain s-tax.htm

Calculators (NB some do not provide for reliefs etc...)

http://www.propertysecrets.net/capital_gains_t ax_calculator.html

http://www.invidion.co.uk/capital_gains_tax_ca lculator.php

NB the above link details the recent changes.

Exemptions Table

http://www.thisismoney.co.uk/tax-advice/tax-ta ble/article.html?in_article_id=394181&in_page_ id=83

[Tom Braider]

The calculation of the taxable gain on a property that's been your home for some of the time you've owned it is very complicated. The starting point is the difference between the selling price and the buying price, of course, but as well as indexation - allowance for inflation - you only pay on the proportion of the gain attributable to the time it wasn;t your home, plus 2 years. (It's not true that CGT is only charged on a property let for 3 years or more.) You also get relief for the costs of buying and selling, and any improvements you've made to the property. As I say, it's complicated! However, I wouldn't think that CGT on the property you describe would amount to much at all, if anything.