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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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My wife and I bought a house in 2008 for £196028.42 and will

Resolved Question:

My wife and I bought a house in 2008 for £196028.42 and will sell it by the end of April 2014 for £233437.What is our capital gains tax liability?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Has the house been your main home and, if so, has it been let at any point? If so, let me know and I will ask you for more information? I don't want to ask for it unless it is necessary?
Customer: replied 3 years ago.

We bought the house as a buy to let and have never lived there

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me and I'll do some calculations.
Expert:  TonyTax replied 3 years ago.

Hi again.

If you exchange contracts to sell the property in 2014/15 for £233,437 having paid £196,029 you will make a gain of £34,408, £18,704 for each of yourself and your wife. You will be able to reduce that further by the costs of purchase and sale (legal fees, survey fees, stamp duty, selling agent fees etc) unless you have already built those into your figures. The first £11,000 of your respective gains will be exempt from CGT so that will leave each of you with a net taxable gain of £7,704.

There are two rates of CGT, 18% and 28%. The rate or combination of rates you will pay will be dependent on the level of your income in the tax year of disposal of the property. Assuming you sell the property in the 2014/15 tax year, one or other of the following will apply to each of you:

1 If your incomes in 2014/15 including the taxable gain is £41,865 or less, then all the taxable gain will be taxed at 18%.

2 If your income in 2014/15 excluding the taxable gain is more than £41,865, then all the taxable gain will be taxed at 28%.

3 If your income in 2014/15 excluding the taxable gain is less than £41,865 but more than £41,865 when you include the taxable gain, then part of it will be taxed at 18% and part at 28%.

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

Customer: replied 3 years ago.

My income is £28k for 2015 /15 and my wife's income is nil.


 


So for the calculation against both my gain and my wife's gain will they take our combined incomes or will they look at the income separately to establish the rate of CGT?

Expert:  TonyTax replied 3 years ago.

It's the individual incomes that determine the CGT rate.

If your income in 2014/15 will be £28,000, you will pay CGT at 18% on your share of the gain.

Your wife will pay CGT at 18% on her share of the gain.

One thing I should mention is that this all applies to a regular buy to let property and not a furnished holiday let property.

Customer: replied 3 years ago.

I am 66 and my wife is 10 years younger

Expert:  TonyTax replied 3 years ago.
Your ages don't matter in this case as your respective gains are nowhere near taking you into the 28% CGT rate. That is, of course, unless you achieve a better price for the house.

Take a look here for the 2014/15 personal allowances. Depending on your date of birth and your income level, your personal allowance could be as high as £10,500 or as low as £10,000.
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