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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 inherited a house which was my main residence untill 2010.

Resolved Question:

I inherited a house which was my main residence untill 2010. I then bought and moved into my present home. I am now selling the first property and would like to know what my CGT liability might be. I am 68, retired, and have an annual tax allowance on income of £10500. The house I'm selling was valued at approx. £215,000 in 2010 and is now on the market for a confident £230,000 minus agents fees of £4000 and legal costs. Can you please indicate what tax I might be liable to pay ?

Many thanks for any help, that you can give.
Regards Sylvie
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

In order that I can do some calculations, would you kindly let me have the following information:

1 When exactly did you inherit the property (the month and year the person who left it to you passed away) and what it was worth at the time? When did you move into it (month and year)?

2 Which month in 2010 did you move out?

3 Was it let after you moved out? If so, when was it first let? Has it been let continuously since?

4 What is the level of your pre-tax and personal allowance income annually?
Customer: replied 2 years ago.

Inherited 21 May 2003...probate value £150,000 Had a live in job, but was only residence 'till 2010 when I put tennants in. It has been let,since to same family from April 2010 'till 31 January 2014.


My personal annual tax allowance is £10500


House was valued at £215,000 in 2010 and will probably sell, soon for £230,000.


I moved into the property that I live in, in 2010

Expert:  TonyTax replied 2 years ago.
Thanks.

When you say you had a live in job, what was that job exactly? Have you ever actually lived in the property you are sellling?
Customer: replied 2 years ago.

I was a hotel manager...live in.. I lived in the house for the first 8 months after my mother died. Then used it for my use when 'off duty' Council Tax was paid during this time.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I do some calculations and draft my answer.
Expert:  TonyTax replied 2 years ago.
Hi again.

You should be able to claim main residence relief even though you were living in job related accommodation at the hotel. If you sell the property for £230,000, you will make a gain of £76,000 (£230,000 - £150,000 - £4,000).

SALE (EXCHANGE OF CONTRACTS) BY 5 APRIL 2014

If the property is sold by 5 April 2014, you will have owned the property for 131 months of which it will have been your main home for 82, let for 46 and vacant for 3. The gain for the period the property was your main home will be exempt from CGT as will the gain for the last 36 months of ownership. That accounts for £68,458 (£76,000 / 131 x 118). The remaining gain of £7,542 is that part of the letting period gain not covered by the last 36 months of ownership (£76,000 / 131 x 13).

As the property was both your main home and it was let you are entitled to letting relief which is the lesser of:

1 £40,000,

2 the sum of the main residence gain and the gain for the last 36 months of ownership of the property which is £68,458 and

3 the letting period gain of £7,542.

Letting relief of £7,542 will reduce the remaining gain of £7,542 to £0 and you should have no CGT to pay.

SALE (EXCHANGE OF CONTRACTS) AFTER 5 APRIL 2014

The exemption for the last 36 months of ownership is being reduced to an exemption for the last 18 months of ownership with effect from 6 April 2014. So, if you sell on 6 April 2014, the figures will be as follows:

Exempt gain £58,015 (£76,000 / 131 x 100)

Letting period gain £17,985 (£76,000 / 131 x 31)

Letting relief £17,985

Taxable gain £0

There is more information on the main residence and CGT in the HMRC helpsheet HS283.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15755
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Expert:  TonyTax replied 2 years ago.
I have to go out for a while but I will be back this evening to answer any follow up questions you may have.

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