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Offloading a Second Property

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Owning a second property is not as straightforward as it may seem. It’s a complex undertaking that demands meticulous thought and consideration. 

If you are letting the house to tenants, you will doubtless have many issues to deal with as the months pass—such as maintenance, rent disputes, enhancements to the property, getting new appliances, and more.

Meanwhile, even if the second house is empty, you may need to navigate security concerns and make intelligent investment decisions with one eye on the future.

Therefore, it may come as no surprise that many people consider offloading a second property – especially in later life. But what are the advantages and drawbacks of doing this? And do you have to pay Capital Gains Tax when selling a second property?

Read our blog below for all the answers you will need.

Do I pay Capital Gains Tax when I sell a second property?

Yes. When you sell a second property in the United Kingdom, you must pay Capital Gains Tax on the profits.

Capital Gains Tax is a tax on the profit you make when selling an asset that has increased in value. Since the UK housing market has a strong track record of improving year-on-year over the past few decades, it is likely that if you bought your property several years ago, it will have gone up in value.

Capital Gains Tax Rate

Capital gains tax on property is set at 28% for higher-rate taxpayers and 18% for basic-rate taxpayers. This is due on any house that is not your primary residence – in other words, a second home. 

Remember that Capital Gains is only a tax on your profit, not the total sale price. You may also be able to seek professional guidance on ways to reduce your Capital Gains Tax bill. Strategies such as maximising available reliefs, using the annual allowance wisely, and considering eligible expenses may be worth considering. This reassurance can help you feel confident and secure in your decision-making process.

Advantages of selling your second property

If you’ve owned your second property for a significant period, chances are you’ve made a substantial profit. Even after accounting for Capital Gains Tax, you could have a substantial sum at your disposal. This windfall could be used to upgrade your primary residence, invest in renovations, support your children, fund your retirement, or more. It offers you the financial freedom and flexibility to make decisions that align with your needs.

Reduce costs

Owning a second house usually includes associated costs, such as council tax, mortgages, and maintenance. Selling it could, therefore, remove these costs, putting more money in your pocket and reducing (potentially) dozens of fees leaving your account every month.

Reduce stress

Selling your second house is likely to alleviate a significant amount of stress. If you are currently renting the home out, you will no longer need to deal with the daily hassles—such as maintenance, collecting rent, settling disputes, and more. Furthermore, even if your second house is empty, you may be forced to make security concerns or investment decisions, which may now be taken off your plate.

Reclaim your time

Being a landlord can be a time-consuming responsibility, potentially detracting from other important aspects of your life. If you’re looking to reclaim some of that time for more meaningful pursuits, selling your second property, especially if it’s tenanted, could be a viable option.

Selling your property may also be more convenient if it is not in ‘rentable’ condition. Some common examples include a faulty structure, broken windows or doors, or a hole in the roof. Selling the house can save you the costs, time and stress of fixing these problems yourself – mainly if you sell to a cash buyer, who can purchase the property in any condition.

Disadvantages of selling your second property

If the housing market is expected to keep growing, which is often the case in the United Kingdom, selling your property will prevent you from taking advantage of that. 

You will also have to pay Capital Gains Tax when you sell your second property, which can eat into your profits by at least 18%, and often even higher.

Reduce income from renting.

Selling your house can also reduce your steady income stream if you are currently renting it out. The lump sum you earn from the sale will be extremely useful, of course, but you may need to budget carefully to ensure that you don’t run out of funds too soon, owing to the loss of regular payments.

Lose inheritable assets

Lots of people who own more than one house intend to pass it on to loved ones—for example, their children. If you offload the property, you will be unable to do this—although you may be able to pass on some of the earnings from the sale, of course.

You may have many fond memories associated with the house that you do not want to say goodbye to, which can add another emotional complication to offloading it.

You may also need to travel extensively when selling your second home if it is far away (e.g. in a holiday location, as it is a ‘holiday home’). Being on-site may be essential for certain parts; you must factor this travelling into your plans.

Choosing how to sell your second property

When the time comes to sell your second property, you’ll have a range of options, each with its own benefits and drawbacks. Understanding these options is crucial to making an informed decision.

Selling your house via a high street estate agent on the open market is by far the most common solution. This is only possible if your property is in sellable condition and if you are prepared to wait the 5+ months that often accompany a sale on the open market.

Speed up the sale with a cash buyer

Alternatively, you could speed up the process by selling directly to a cash house buyer. This would also enable you to sell your house in any condition, which is helpful if it has significant challenges. It saves you time and stress because the transaction can be completed within seven days rather than dragging on for over half a year.

Whatever option you think is best, it is essential to do thorough research on the organisation you choose to ensure that they are trustworthy and provide a good service. You may also want to speak to a financial advisor or accountant, who can guide you on any legislation surrounding Capital Gains Tax or Inheritance Tax that may impact your decisions.

Do I need to evict my tenants to sell a second property?

It is rare, although possible, to find a buyer on the open market willing to purchase a house with tenants living there. In most cases, people want to live in the property they buy, which is why this can be a significant obstacle.A convenient way to sell a tenanted property is to use a cash house buyer, who will take the property off your hands even if you have sitting tenants or squatters. It does not prevent you from selling if the tenants have caused significant damage to the house, either – cash buyers can purchase in any condition.

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