Sell property in London to finance Dublin purchase?

Dubber

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5
Hi all,

First time poster, but have lurked here for a while.

We would really like some advice on our current situation. Ideally, we would also like to meet with an independent adviser in real life, but that's another thread.

We own a flat in London (rented out). It was purchased in 1999, and is currently valued at approximately £320,000. There is a mortgage outstanding of £140,000. We remortgaged it 2 years ago. The plan at the time was to buy ourselves out of the negative equity and house we were in, and leave some over for a deposit on a house in another area of Dublin.

For various reasons, we haven't bought another house yet and are now facing rapidly increasing prices. Our question is whether or not to take advantage of an increasing London market and sell the property. We would use some of it to buy ourselves the house we want here, and invest the rest. We are also aware that as of April 2015, we will be subject to 28% Capital Gains Tax on the flat, whereas there would be no tax to pay now. At the moment, the rent covers the mortgage on the flat, with a little left over that goes towards management fees and repairs etc.

We were stung badly when we bought here in 2005, and I am so, so wary of getting sucked into the whole stinking mess of rapidly increasing prices again, and the panic that accompanies it. That said, rent is also going up, and we really want a home to settle ourselves into.

We have young children and both work hard to provide for them. I always thought that the flat in London was our future insurance, but as things stand, selling it could really help us to buy, and would avoid the CGT that would be applicable next year.

I'm sure there's lots of necessary information that I haven't provided in order to offer advice, but post questions and I will do my best to answer them.

I would really appreciate any outside perspectives and advice. Thanks :)
 
If you sell London flat do you have additional savings to assist in buying a house here.
If you do and you would have little or no mortgage based on the info you provided I would sell London, but here and then if you needed no mortgage perhaps save what you would most likely be paying if you had a mortgage and build you long term insurance that way.
This could also assist if one of you decided to take some time out to raise your kids or go on a shorter working year or the likes. You could have a good quality of life.
Big off put for me would be to lose out on paying the 28%CGT.
 
Thanks, niceoneted. We have a decent deposit saved here. With prices the way they are though, the repayment on the type of house we would like to buy would be much bigger than we would like.
We weren't planning on using all the proceeds of a London sale to buy here because I'm afraid of watching it all disappear into a big black hole if things crash again. Once bitten and all that. We just thought we would use it to add to the deposit, give us some renovation costs and invest/save the rest. We could then buy the house we would like, but have smaller repayments.
Hubby doesn't have a pension, I do, so at the back of our minds was always the fact that we had the flat to cover that in the future. If we sell, then we have to sort that out in some way too.


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I presume the OP is not aware that Irish resident, ordinarily resident and domiciled persons are subject to Irish CGT on UK gains at 33%.

But I'm sure they will clarify the position.
 
The first question is whether you should sell the London flat now or some time in the future.

The main issue here is the outlook for London prices and your house in particular. Many in the UK are suggesting that London prices are in bubble territory. I have no idea, but selling now seems to me to minimise your risk. (You appear to have other properties and borrowings, so selling reduces your risk)

If you have a very cheap tracker on the UK property, it might be worth keeping it.

You will need to pay for professional advice on the CGT issue. Don't assume you understand it and that it is exempt from CGT. I presume it's currently exempt from UK CGT as it was your home? Does that exempt it from Irish CGT? I simply don't know. Is there any tax planning which could minimise your CGT exposure? Take professional advice on this.

What to do with the proceeds. That is another thread completely.

You seem to have a property in Ireland in negative equity. If so, complete the following

Information required for mortgage arrears and negative equity questions

If it's your home and if you have a cheap tracker on it, you may be able to move the cheap tracker to a new house for an increase in the rate of 1%.
 
Hi all,
Thanks for the replies. Yes, I knew that CGT would be due in Ireland, but I had it at 25%, not 33%. We had asked a tax accountant in the UK about CGT liability there, so that was where we had that information from.

The UK mortgage is not a tracker. And to clarify, we do not currently own a property in Ireland.

I think it is clear that we need to pay for professional financial and tax advice. Is there someone who might be able to look at both issues? If so, would appreciate any recommendations.


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Hi,

I'm in the same postion as yourselves and have a property in London that I am putting on the market in the next couple of months.

There is no tax advantage in doing this before April 2015. Although there is currently no CGT for non-residents in the UK, you are fully liable for gains on a disposal of UK property in Ireland and the current rate is 33%. So, if you sell after April next year you pay HMRC the UK rate of 28% and then the difference between 33% and 28% is paid to Irish Revenue. There is a double taxation agreement between Ireland and the UK.

http://www.revenue.ie/en/personal/buy-sell/foreign-property/disposal-foreign-property.html

Was the property your main residence in the UK ?
 
It has been our main residence in the UK in the past, but is not currently. Does that make a difference?

Finances and tax are far from my strong point. Will definitely need to find someone reliable to go through this and make sure that we are doing things (a) legally and (b) wisely.


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Yes, you will have some relief for the years used as your principal private residence.

How many years and what years were you resident ? What was the original purchase price ?

Read the guide to capital gains document. You will find this in the below link at the Revenue website http://www.revenue.ie/en/personal/buy-sell/foreign-property/disposal-foreign-property.html There is an example of PPR relief in chapter 11 example 5. Note in the revenue examples rates are out of date. See below table for current rates:

Rate and payment of Capital Gains Tax

The standard rate of Capital Gains Tax is 33% for disposals made on or after 5 December 2012.

Disposals from: Rate of CGT was:
7 December 2011 to 5 December 2012 30%
8 April 2009 to 6 December 2011 25%
15 October 2008 to 7 April 2009 22%
On or before 14 October 2008 20%

You can deduct all purchase costs, solicitor costs, etc and any enhancements made to the property. Your PPR relief can then be deducted and your annual allowance giving you your chargeable gain. These deductions are against your original purchase price in 1999.
 
Thanks for that Denise2007. That whole last paragraph made me want to close my eyes, cover my ears and sing 'la la la'. No offence ;) I'm just not a finance/maths kind of person.

I was hoping that this might be straightforward, but it seems not. Professional advice it is. Have looked through some names/recommendations on AAM so will make contact and go from there.

Thanks again for the input.


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Sorry for bring this back

I live in Germany and rent. I left Ireland after losing my job. Would it work the same if I sold my Irish property(was my main residence) (2006 -2011) to buy a family home here?

i.e. Sold Apartment for €150,000 in Ireland pay 33% tax and then when I buy here in German I would have to pay approx 10% tax on family home here.

Would I loss €49,500 in Ireland only to Pay example €20,000 on €200,000 home here?

I would fell very hard done by again if Ireland. (Lets say is not good to me.) again.

Thanks in advance

gar32
 
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