If I convert my home into a buy-to-let, at what point would Capital Gains Tax begin if I later sell it?
24 April 2025
Question by Boring Money reader
Hello, could you please clarify how Capital Gains Tax (CGT) would be calculated if I converted my current home, which I've lived in for 25 years, into a buy-to-let property? I currently have a repayment mortgage with only a small amount remaining. I plan to remortgage it as a buy-to-let property so I can buy another home to live in. Specifically, if I eventually sell this property, would the CGT calculation start from the date I convert it to a buy-to-let, or from the original purchase date? Thank you.
Answered by Adrian Kidd
Changing your residential property to a buy-to-let will not mean you incur any taxes at this point.
What would be sensible is to get a valuation of the property at the point you decide to do this, as that would be the point where any positive changes in values would potentially incur a capital gain from.
The reason is you would be eligible for principal property relief for the period it was owned as owner-occupier residential property, so in theory the first 25 years of ownership would not be taxable. The rate of tax you pay depends on your tax rate at the time of disposal. This could be changed in the future - as any legislation can be.
If you are looking at converting to a buy-to-let, you will need to inform your current lender as to your intentions. This is part of your mortgage conditions. It is likely they will allow this, but it is not guaranteed.
If you are looking to release equity to buy a new home, this will possibly be classed as income, so bear this in mind as it may impact your marginal rate of Income Tax.
What you are proposing is more than achievable from the information provided, but I would recommend the use of a good mortgage broker, and possibly an accountant to make sure you are doing all of the above in the most efficient way and you fully understand the implications of your decisions. There could be a better way of structuring this or to invest.
Hope this was helpful.
