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Thank you Sam. We purchased the property in 1998 off plan. We then spent about 10,000 getting the garden turfed and planted and a large decking added. We also spent a further £40,000 having the loft converted to another bedroom and bathroom. We also built a 4 bay car port for £10,000 and also converted the garage to an office for £5,000 Therefore our total spend has been £125,000 + £10,000 + £40,000 + £10,000 + £5,000 = £190,000 + our initial fees (where would I find out how much we paid to estate agents, stamp duty in 1998 etc). If I assume another £10,000 in fees this brings the total up to £200,000.
If we sell for £375,000 this means there is £175,000 potential capital gains. We did not declare the rental income to HMRC as after paying the mortgage on the property it cleared £300 a month which was clares only income therefore below the tax threshold. Can we contact HMRC and tell them about the last 7 years income of £3,600 per year and then claim the private letting relief of £40,000? As my wifes income was only the £3,600 how much would we actually pay in Capital Gains Tax and are there any other ways to offset anything else before paying the tax? Thanks again!
Thanks Sam, of the 195,000 Im guessing we can claim 7.5 or residency of the total of 16 years we owned the property so that equates to 195000/16*7.5 correct?
Yes that's right - (as its very likely the sale will take place after 05/04/2014) although when you make the calculation fine tune this down to months of ownership/exemption, rather than years.
I am about to meet with clients, but I shall be back within the hour - if you have any more follow up questions, but it would be appreciated if you could rate the level of service received.