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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a property I have owned for 30 years cost 25K value

Customer Question

I have a property I have owned for 30 years cost 25K value now say 90k I used it as my office until ten years ago with a few periods of rental. for last 10 years has been rented as house / office. I am a basic rate tax payer and aged 60. Thinking about selling it what are likely tax costs and how can I reduce these if at all possible. Thank you
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you confirm that the property was never used as your main residence please. Was it bought after 31 March 1982?
Customer: replied 2 years ago.

Property purchased late 1982, never been my principal private residence.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.

Hi again.

If you sell the property for £90,000 you will make a gain of £65,000. The first £10,900 of that will be exempt from CGT due to the annual exemption, assuming you have no other gains in the same tax year, and the balance of £54,100 will be taxable at 18%, 28% or a combination of the two rates depending on the level of your income in the tax year of disposal. If you sell the property in the current tax year, one of the following will apply to you:

1 If your income including the taxable gain is less than £41,450, you will pay CGT on all the taxable gain at 18%.

2 If your income excluding the taxable gain is more than £41,450, you will pay CGT on all the taxable gain at 28%.

3 If your income excluding the taxable gain is less than £41,450 but more than £41,450 when add the taxable gain then some of the gain will be taxable at 18% and some at 28%.

I'm afraid that whilst you used the property as your office, you won't be entitled to any relief for the sale of what was a business asset as too much time has passed since you stopped using it as such. That may or may not have been a problem in any event as the property would appear to be residential.

As the property has never been your main home, you are not entitled to main residence relief or letting relief. If you lived in the property for a year or so, you might get some main residence relief for the last 18 months of ownership (assuming you live in it for no more than 18 months, more if you do) and letting relief. However, if HMRC thought that you had moved into the property short term simply as a tax saving exercise, they will seek to disallow any such claim.

 

Putting the property into joint names with a spouse or civil partner you live with will give you an extra £10,900 exemption but you need to take account of their income to assess what CGT rate they would pay in order to determine any tax saving to be had or otherwise.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.


property has been rented mostly as a business and has had and paid business rates for probably 27 of the years I have owned it . So last 3 years rented as residential I ran my business from the premises using all rooms as a business when first purchased then let it as a business premises for 7 years. does this make any difference as it appears your have the opinion it was residential.

Expert:  TonyTax replied 2 years ago.
You said in your question that it had been rented as a "house/office" for the last 10 years, hence my residential comment.

During the period that the property has been let to a third party business as opposed to being used as your own business premises have you provided any services to the tenant as part of the letting agreement? If so, what ancillary services have you provided? How have you disclosed the rental income in your annual tax return assuming the property is owned by you personally as opposed to by a company which you own, in the tax return property income pages or the sell-employment pages? . Who has paid the business rates, you or the tenant?

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