Q I own a buy-to-let property and am considering selling it to fund the purchase of a larger buy-to-let investment property. In essence, I would be moving the investment from property one to property two. The sale proceeds of property one (after deduction of the outstanding mortgages) would be fully used as a deposit for property. Would capital gains tax still apply, even though the investment has moved to another property?
DP
A Yes, capital gains tax (CGT) would still apply but, no, you wouldn’t be able to defer paying the tax by claiming business asset rollover relief – which is what I assume you are hoping to do. If you are eligible to claim it – which you are not – rollover relief lets you put off paying any CGT due on the gain from the sale of a business asset until you sell the business asset to replace it but only – among other things – if you are trading. Unfortunately for you, HM Revenue and Customs doesn’t consider investing in a buy-to-let property as trading. So you will have to pay CGT at 18% or 28% (depending on the rate of income tax you pay) on the gain you make on property one less the new £6,000 CGT allowance (which is down from £12,300 in the 2022-23 tax year and due to go down further to £3,000 in 2024-25).
