CGT on property

[the blades]

I have a second property which (after living in) I have rented out for the last 14 years. I am about to sell this property for a small profit (yes, I managed to buy the house that avoided the property boom )

How do I calculate how much, if any, capital gains tax I will be liable to pay.

My expected profit is only around £15K

All info greatly appreciated.


UTB

 

[Roberto]

You will hardly have to pay any CGT, IMHO, unless you have other capital gains. There's an exempt allowance and you're allowed to carry it forward for one year, I believe. And I think you can also offset against it the various costs of selling the property, and (even more relevantly) any money you've ever spent on doing it up over all the years you've owned it. That will surely account for 15k, near enough? Whatever you do, check with an accountant rather than taking my word for anything, but all my instincts tell me you won't really be paying any CGT worth talking about.

 

[G-Man]

Blades,

You would have to pay CGT on the amount of increase in value for the proportion of time you rented the property out, less 3 years.

For example,

You bought in 1985 for £20K. You live in it until 1990. The property is then rented out until now, 2004, and is sold for £35K.

Therefore the first 8 years (5 years occupation + 3 'Free' years) are tax free, the remaining 12 years attract CGT. The taxable gain would therefore be appx £9k. As has been mentioned previously any costs of disposal, such as solicitors/estate agent fees are deductible from this amount.

HTH.

G-Man

 

[X-Ray Specs]

Best place to start is the IR web site. http://www.inlandrevenue.gov.uk

Having just performed the calc what you need to do is :-
Purchase price + stamp duty + other fees = total purchase price (the higher the better)
You then have to refer the IR http://www.inlandrevenue.gov.uk/leaflets/cgt1.htm to get the indexation allowance for owing the property 14 years.
You multiply the Total purchase price by the indexation figure to get the true purchase value.

Then take the sale proceeds figure and subtract all fees which gives you the value chargable.

Subtract Purchase Value from Value Chargable to get the gain on which CGT is chargable.

You then have to apply Taper relief which will bring the figure down further.

That final figure is the amount you pay CGT on so if its £1,000 and you are a 40% rate taxpayer, you would need to pay £400.

The IR web site is surprisingly good and don't forget to charge everthing you can to minimise CGT payable.

An example is shown below.
Of course having lived in the property you are entitled to further relief which I did not qualify for so cannot comment.


CGT Calculations on sale of property

Purchase price £50,000
Stamp Duty £500
Soliciters fees £500
----------
£51,000
Indexation X 0.507
-----------
£76,857


Sale Proceeds £120,000
Fees £2000
-----------
Value Chargeable £118,000
Purchase Value £76,857
------------
Gain £42,143

Taper Relief 85% £35,821

CGT chargeable on £35,821

 

[the blades]

Best place to start is the IR web site. http://www.inlandrevenue.gov.uk

Having just performed the calc what you need to do is :-
Purchase price + stamp duty + other fees = total purchase price (the higher the better)
You then have to refer the IR http://www.inlandrevenue.gov.uk/leaflets/cgt1.htm to get the indexation allowance for owing the property 14 years.
You multiply the Total purchase price by the indexation figure to get the true purchase value.

Then take the sale proceeds figure and subtract all fees which gives you the value chargable.

Subtract Purchase Value from Value Chargable to get the gain on which CGT is chargable.

You then have to apply Taper relief which will bring the figure down further.

That final figure is the amount you pay CGT on so if its £1,000 and you are a 40% rate taxpayer, you would need to pay £400.

The IR web site is surprisingly good and don't forget to charge everthing you can to minimise CGT payable.

An example is shown below.
Of course having lived in the property you are entitled to further relief which I did not qualify for so cannot comment.


CGT Calculations on sale of property

Purchase price £50,000
Stamp Duty £500
Soliciters fees £500
----------
£51,000
Indexation X 0.507
-----------
£76,857


Sale Proceeds £120,000
Fees £2000
-----------
Value Chargeable £118,000
Purchase Value £76,857
------------
Gain £42,143

Taper Relief 85% £35,821

CGT chargeable on £35,821

Chaps,

many thanks for all the trouble you've taken to post.

Cheers,
UTB