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Sam
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Category: Tax
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My wife and I bought a property for 78k with a 20k deposit

Customer Question

My wife and I bought a property for 78k with a 20k deposit in 2000. Moved out in 2004 into a new home and keep the previous property for rental purposes. House is now worth approx 168k. Would like to sell in the near future, within 2 years to finance an extension on new house. See that the CGT rules are set to change in April. Could you please tell me how this would affect the amount of tax we would have to pay. Both uk citizens, me full time, wife part time. Whether it would make a significant difference may require us to sell before April. Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.

The changes to which you refer involve overseas owners of property so won't affect you.
Customer: replied 2 years ago.
That's a surprise as I've I've just read in the times that it refers to people who have lived in that property? Does that mean overseas?
Expert:  bigduckontax replied 2 years ago.
It refers to overseas owners of property.
Customer: replied 2 years ago.
Would you able to tell me then what my cgt bill would be if I sold tomorrow at the rates mentioned in first question. My wife and I are both basic rate taxpayers pleases
Expert:  bigduckontax replied 2 years ago.
I assume you did not re-occupy between rentals. In that case your gain is of the order of 90K, taxable at 18%. There is an allowance of GBP 10900 and the sale costs come off to leaving you a gain of some 79K.
Customer: replied 2 years ago.
Changes to private residence relief which will come into effect in April 2014 will mean that anyone selling a property they have not lived in for more than 18 months will face a higher tax bill.

Currently, anyone selling a home that has at some point been their main residence gets three years of CGT relief, but that period is to be halved. The Treasury said it expected to make £360m out of the change by the 2018/19 tax year.

Just read this, so how will this affect me?
Expert:  bigduckontax replied 2 years ago.
The first rule you mention doesn't come in until April 2015. The second rule depends upon when you actually sell.
Customer: replied 2 years ago.
Those who have turned their former homes into buy-to-let investments will be hit by the change from April 2014, while foreigners selling British homes will have to pay CGT from 2015.
Foreign owners will only have to pay tax on future gains after that date, however.

Sorry to press the point but this is what I have read in three different papers this morning
Expert:  bigduckontax replied 2 years ago.
Which is why you should seriously consider selling before April 2014.
Expert:  Sam replied 2 years ago.
Whilst the last 36 months of ownership will change to allow just the last 18 months of ownership to form a exemption from capital gains (along with the time that you lived in this property as your main residence) you also are still going to be due private lettings relief, which can allow a further £40,000 of exemption AND the first £11,000 from 06/04/2014 will be exempt (currently £10,900) so you have been misinformed that your capital gain tax bill will be far higher that it actually will be. DO advise if you wish me to expand further.ThanksSam

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