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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I have a house to sell bought in 1992 for 40.000 its been rented

Resolved Question:

I have a house to sell bought in 1992 for 40.000 its been rented out all of this time
i now want to sell it for 190.000 and invest all of the money in another property. Do i have to pay c g t and how much please
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

May I ask if you have ever lived in the property please or has it always been used as a rental property?

Customer:

i have lived in it for two years

Joshua :

Thanks. May I ask for which period?

Customer:

1992 for 10 m0nths and 2002 for 12 months

Joshua :

Thanks. Lastly do you own the property on your own? Are you a higher or lower rate taxpayer for income tax purposes? Would you be willing to move back into the property again prior to sale or is this not possible?

Customer:

i am a joint owner with my wife iwould not move back in as it is rented out i live in northampton the house is in bedford

Joshua :

Thanks. Are you and your wife higher or lower rate taxpayers for income tax purposes?

Customer:

lower rate

Joshua :

Thanks. In order to calculate your CGT gain you need to deduct the acquisition cost from the sale price => £190000-40000 = gain of £150000. Divide this by 22 years to get the yearly gain = £6818

Joshua :

You can deduct 1 year for your 1992 period of occupation and 3 years for your 2002 period of occupation (three years because of a concession allowed by HMRC. Therefore you are looking at 18 years of gain altogether = £122727.

Customer:

I DO NOT UNDERSTAND

Joshua :

From this you can deduct you and your wife's annual allowances of £10,900 x 2 = 21800. In addition you can deduct something called private lettiings relief because you once live in the property of £40,000. Accordingly you have a gain of £60927. You can also deduct the costs of acquisition (e.g. solicitors fees etc) and the cost of any improvements you have made. You can also deduct selling costs e.g. agents fees etc. However I will not do this as you won't know these figures yet.

Joshua :

Accordingly before the above deductions you have a gain of £60,927 which is split between you and your wife. You will pay tax at 18% on the above figure if you are lower rate tax papers for income tax up to the limit of your remaining allowance therefore if you have sufficient remaining allowance the tax due is likely to be in the region of £10900 before the additional deductions you can make.

Customer:

Thank you so i take all deductions from 122.727 ok

Joshua :

The above is a complex calculation and most people will retain an accountant to submit the return for them. However I hope the above gives you some guidance as to what to expect.

Joshua :

Yes after deducting all the reliefs you are allowed, your total gain is £60927. From this you can also deduct the acquisition and selling costs and any improvements you have made before you work out the tax due at 18% or 28% at either the lower or higher rate band.

Customer:

thank you it has been very helpful

Joshua :

A pleasure. I wish to all the best with your property sale. Remember to keep a note of the costs you incur so you can deduct everything you can from your gain.

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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