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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5029
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am in the process of selling the house where my parents lived

Resolved Question:

I am in the process of selling the house where my parents lived - although the house is in my name. I have paid bills for them over the last few years, and have recently had to 'gut the house to bring it up to standard to sell - where do I stand re paying any taxes due on the house.
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.

Hello and welcome to the site. Thank you for your question.

If this is your second home, i.e. the property you don't live in or have never lived in as your main residence, then all gain from sale of it would be chargeable to capital gains tax subject to following deductions...

You can offset the
- cost of capital improvements (costs than enhance the value of the property as opposed to minor repairs) and
- costs associated with buying and selling the property (stamp duty, solicitor's fees, selling agent's commission)

from the gain before arriving at chargeable gain.

You claim your gains annual exempt amount from it and the balance would be chargeable to CGT at 18%, 28% or a combination of both depending on your total income in the year of sale of property.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

I have occasionally lived with my parents - when allowed - both were ill and not the easiest to deal with, and although they were not aware contributed to some of the care costs, . I have bills relating to double glazing that was put in the house several years ago to make life easier for them. Sorry I do not understand re my income - I have a state pension, private pension and work part time. So my own income is limited. I am also paying council tax, normal utility bills plus gardener to keep the house tidy.

Expert:  taxadvisor.uk replied 3 years ago.
Mim, thank you for your detailed reply...

Occasional living in the property would not make it your main residence, I'm afraid.
Costs relating to double glazing would be deemed capital costs and deductible.
I will explain CGT rate applicable in the form of this example below and hope it makes it clearer ..

CGT calculations
Potential capital gain £40,000
Tax year 2014-15
Gains chargeable to CGT 40,000
Annual Gains exempt allowance 11,000
Chargeable gain 29,000
CGT calculation
If income after personal allowances is >£31,865
then CGT on gain is taxed at 28% £8,120
If income after personal allowances is less than
£31,865 then some gain will be taxed at 18%
and the balance at 28% - see example below
Assume income after allowances is
(25,000-10,500) 14,500
Chargeable gain taxed at 18% 17,365
Chargeable gain taxed at 28% 11,635
CGT £6,384

I hope this is helpful and answers your question.
Customer: replied 3 years ago.

Sorry to ask more questions, the property is being sold for £106k, the property was originally bought for c£25k in 1986, my own personal income is £8268 state pension, £2388 private pension £1176 financial assistance and c£6k part time income, totally dependent on hours worked. The cost of all the work is C£11k plus another £3k for when double glazing was put in - plus estate agents fees, solicitors and other costs with maintaining the property whilst it has been empty - where do I go to enable me to get this dealt with .

Expert:  taxadvisor.uk replied 3 years ago.
Mim, thank you for your reply..

Please explain what you mean by "where do I go to enable me to get this dealt with "

Many thanks
Customer: replied 3 years ago.

Who do I need to talk to to have tax element dealt with once I have sold the property

Expert:  taxadvisor.uk replied 3 years ago.
Mim, thank you for your reply.

You should be able to deal with the tax element yourself if you follow my worked example here..
CGT calculations
Sale proceeds £106,000
Cost price £25,000
Capital improvements (11,000+3,000) £14,000
Agents fees, solicitors fee and other costs - say £5,000
------------
Total cost price £44,000
------------
Potential capital gain £62,000
Tax year 2014-15
Gains chargeable to CGT 62,000
Annual Gains exempt allowance 11,000
Chargeable gain 51,000
As income after personal allowances is less than
£31,865 then some gain will be taxed at 18%
and the balance at 28% - see example below
Assume income after allowances is
State pension 8,268
private pension 2,388
Financial asiistance (assuming taxable) 1,176
Part-time income 6,000
------------
Total income 17,832
Personal allowance 10,500
------------
Income after personal allowance 7,332
------------
CGT calculation
Chargeable gain taxed at 18% 24,533 [31,865-7,332]
Chargeable gain taxed at 28% 26,467 [51,000-24,533]
CGT £11,827

You will have to report the gain by completing capital Gains section of the tax return.

I hope this is helpful and answers your question.
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer,

Best wishes