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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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Hi there, I have just completed sale on a house. I need

Resolved Question:

Hi there,

I have just completed sale on a house. I need to figure out how much capital gains, if any, I'll need to pay.

I co-owned the flat with a friend. Together we had a mortgage totaling £216,000 (100% mortgage). We sold for £355,000, and made a profit after paying mortgage, solicitors, estate agents etc of £130,350. I therefore made a personal gain of £65,175.

We lived in the flat from July 2006 (purchased) to June 2010. We rented out the property from June 2010 - Nov 2013. We completed the sale in Feb 2014.

I understand that the last three years of ownership are exempt from capital gains tax, and I lived in the flat for four years. So - how much of my £65,175 profit will need to be taxed?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

I've used £65,175 as your share of the gain but would point out that the mortgage does not form part of the calculation of a capital gain. A gain is calculated by deducting the cost of the property (which may be funded wholly or partly by a mortgage) from the disposal proceeds of the property. Legal fees, selling agent fees and improvement costs can also be taken into account.

By the time you sold the property, you owned it for 92 months of which you lived it for 48, let it for 41 and it was vacant for 3.

The gain for the period the property was your main home is exempt from CGT as is the gain for the last 36 months of ownership. That accounts for £59,508 (£65,175 / 92 x 84). The remaining gain of £5,667 is that part of the letting period gain which is not covered by the last 36 months of ownership (££61,575 / 92 x 8).

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 £59,508 and

3 the letting period gain of £5,667.

Letting relief of £5,667 will be cover the remaining gain of £5,667 and you should have no CGT to pay.

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

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