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November Questions and Answers

Newsletter issue – November 2022

Q. I live in a semi-detached property and am in the process of purchasing my neighbor's property with the intention of converting the two houses into one. Therefore, the new property will be our main residence alongside our existing property as they will become one. In this situation, are we liable for the 3% stamp duty land tax (SDLT) surcharge?

A: The extra 3% SDLT charged on a second property will apply. After the purchase, you will own additional residential property, and you are not replacing your main residence therefore the higher rate is due.

Q. I am self-employed and receive a small pension. My accounts show that for the tax year 2021/22 I have a self-employment profit of £6,538 and a pension received of £9,305, giving a total income of £15,843. I have available losses brought forward from the previous year of £4,127. Do I need to utilize whole loss in this year against the profit from self-employment, or can I use only £3,273 to bring my taxable profit to nil (the rest would be covered by the personal allowance of £12,570)? Can I carry forward the remaining loss of £854 to the next year?

A: Such losses must be set off against the first year in which a profit arises and any balance in the next tax year. Therefore, the loss must be used as far as possible in 21/22 (i.e., £4,127) leaving no losses available to be carried forward, even if the result is that personal allowances are wasted.

Q. I currently let out a flat and the tenants have approached me with an offer of buying the flat on a monthly installment plan instead of getting a mortgage and paying at point of sale as would be the usual situation on a sale of a property. What are the tax implications?

A: From a capital gains tax (CGT) perspective the sale is treated as selling the whole property on the date of the exchange of contracts, even though the sale proceeds will be received over a period of time. However, you do have the option of paying the CGT in installments on application to HMRC.

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