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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4416
Experience:  FCCA FCMA CGMA ACIS
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We bought a holiday home in 2005 for £260k (a flat in a block

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We bought a holiday home in 2005 for £260k (a flat in a block in Brighton). We spent approx £40k on internal renovations in the first year and then another £10k on the block as a whole as part of our freehold requirements. We also spend £3k per year in service charges. If we sell it for £450k, what will we have to pay in CGT? (We are higher rate tax payers). Thank you.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Yes you will, but soft, there are a few calculations to be done to determine the actual capital gain. For Capital Gains Tax (CGT) purposes the 260K purchase price is inflated by the purchase costs including stamp duty plus the 40K renovations and the 10K bringing it up to 310K. The 3K pa on service charges doesn't count. From the 450K sale price must be deducted selling charges. As you have given me no indication of purchase and sale costs I have to ignore these, but please remember them, they will reduce your gain by inflating the purchase price and reducing the sale price ditto.

So at present we have a gain of 450K - 260K - 40K - 10K = 140K. You say 'we' so I assume that you are spouses so the 140K is divided by 2 to give 70K each. From this deduct your Annual Exempt Allowance of 11.1K leaves say 59K gain taxable at 28% = worst case exposure to CGT say 16.5K each. Simple, as the meercat in the TV advert would say!

I do hope I have thrown some light on CGT, a highly complex tax.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.