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Sep, 2014

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  1. #1

    Default Capital Gains Tax - is there a definitive answer ?

    In September 2000 my wife and I moved in to a purchased property which was our only residence (and property) until July 2008 when we relocated to a different part of the company with my work and bought a new home which has been our primary residence since then - but we decided to keep the 2000 purchase as a rental property and have had a tenant in there ever since.

    We are now looking to sell the 2000 property and have had three different summaries of our CGT liability (none from professional advisors as yet).

    We purchased the original property for £147000 and when we left in 2008 it was valued at £250,000 and this is still the approximate value.

    Any advice/guidance would be much welcome and also how do we declare any liability ?

    Thanks

  2. #2

    Default

    You get to deduct allowable expenses from the gain such as your buying and selling costs. Then work out what the total gain is and divide it by the number of years owned. The years you lived there is exempt and as it was once your primary principle residence the last three years of ownership are also exempt. Then as you rented out the property you also qualify for letting relief, you need to look this up as i don't know off the top of my head how much this is.

    Once you know what your taxable gain is, if the property is owned jointly then both you and your wife split the gain and both get to use your yearly allowance of £10,600 before paying anything. I'd be very suprised if you have to pay anything due to the percentage of time it was your PPR and the three exempt years.

    What have others told you?

  3. #3
    Join Date
    Aug 2008
    Posts
    3,395

    Default

    1. Your capital gain over 12 years is approx 100K.

    2. Your period of residence + 3 more years is exempt for CGT and this covers period up to July 2011. Therefore if you sell in July 2012 . about 1 year of gain out of 12 years ownership is liable to CGT = 100K divided by 12 years = 8K gain.

    This 8K gain is below the free allowance of 10,600 for CGT .

    So no tax payable.

  4. #4
    Join Date
    Aug 2008
    Posts
    2,530

    Default

    Not so, Gordon999.

    The 8k gain is offset by letting relief (assuming the property was let constantly between July 2008 and the date 3 years prior to the sale date).

  5. #5
    Join Date
    Aug 2008
    Posts
    3,395

    Default

    Telometer,

    yes , you are right and I was err.... "cutting corners"

  6. #6

    Smile Thanks all

    Quote Originally Posted by Gordon999 View Post
    Telometer,

    yes , you are right and I was err.... "cutting corners"
    Ultimately I am hearing there is no tax liability unless Telometer's comment means otherwise. Two of the three people had pretty much said the same as above but one said that it was the difference in value from purchase to sale less costs which means a lot of CGT ! Do we need to declare there is no liability ?

  7. #7

    Wink

    Quote Originally Posted by JaneK2011 View Post
    You get to deduct allowable expenses from the gain such as your buying and selling costs. Then work out what the total gain is and divide it by the number of years owned. The years you lived there is exempt and as it was once your primary principle residence the last three years of ownership are also exempt. Then as you rented out the property you also qualify for letting relief, you need to look this up as i don't know off the top of my head how much this is.

    Once you know what your taxable gain is, if the property is owned jointly then both you and your wife split the gain and both get to use your yearly allowance of £10,600 before paying anything. I'd be very suprised if you have to pay anything due to the percentage of time it was your PPR and the three exempt years.

    What have others told you?
    Thanks for the detail in this answer. It probably summarises all of the bits we have been told. I think that Gordon999s answer was as he says a short cut but in essence the concept is the same ie the taxable amount if below our allowances so even though we rented it the whole period this appears to be irrelevant ?

  8. #8
    Join Date
    Aug 2008
    Posts
    2,530

    Default

    It would be relevant if you had other assets sold in the period like shares.

  9. #9

    Default

    Quote Originally Posted by Telometer View Post
    It would be relevant if you had other assets sold in the period like shares.
    No other sales that involve CGT !

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