Money from sale of second home

[Snoken]

We have a second property which we rent out and I am trying to convince my husband we should sell. The background is that we bought this flat 15 years ago, lived in it for 4 years, then my husbands work relocated him to another part of England. We upped sticks, bought a house in the new area but kept our flat in case we wanted to move back.

We aren’t likely to move back, and we are barely making any money on this flat anymore because the flat is getting quite tired, things break all the time and we are forever repairing it. I think we should sell it, but dh says we’ll barely make any money from it because he’s a high income earner and most of the profit will eaten up by taxes.

So, the round numbers are:

Bought flat for £400k
Could now sell for £900k
Joint household income £130k

Capital gains tax should still leave us with a substantial profit from what I can see, but dh says we’ll only end up with about £150k, because he is taxed in a higher tax bracket. Am I missing something? I thought that once you have paid your cgt, that’s it. You don’t get further taxed on that amount. Or are there other substantial costs involved? I know there will be some agency and legal fees on top, but that’s not hundreds of thousands.

To only end up with £150k on a £500k profit you would need to be paying tax at 70%.
Higher & additional rate tax payers are charged 28% on gains on residential property.
Plus you'll have some PPR relief, annual exempt amount(s).

Thank you @Chasingsquirrels! This is what I can find too. He is just adamant that it’s not worth selling because of taxes and I think it’s just a hassle keeping it as it just springs lots of unexpected costs on us which means we can’t always fix urgent issues with the house we actually live in.

We sold a second property and it was just cgt plus estate agent and solicitor charges. He may be calculating his half rather than whole thing. If he is higher rate or amount takes you into higher rate its 28% but some costs and allowances and your cgt annual allowances, hmrc site has details. Also you can add more to pension to reduce marginal tax rate.

Why don,t you ask him f9r clarify

Perhaps he is thinking about interest on the profits once you invest

He hasn’t calculated that correctly

As others have said, he has not got the calculation right.

As well as the hassle, if the flat is not appreciating in value or bringing in a profit from the rental income, you have also got the opportunity cost of not investing that money elsewhere for a better return.

Thank you all for confirming this. He is generally much better at finance questions than I am and I tend to just go with what he says makes the most sense. He wants to keep this flat and I don't so I think he's just making stuff up as he knows I rarely question things like this and that way I won't think it's worth it either. I can now go and talk to him again knowing that he is not being truthful.

You might be better speaking with an accountant. It might be better to put the flat solely in your name before selling it. 🤔

The other point that has been missed here is that it’s was your home. The PPR reliefs add to the amount of allowances. Your husband is definitely wrong.