How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4200
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Hi I bought my first property in 1989 for 35000 I lived in

Customer Question

Hi I bought my first property in 1989 for 35000 I lived in it with my mum until 1993, I got married in 1990 in 1993 my ex husband bought a house solely in his name, we then divorced in 2002 I then had to take over his mortgage which I did I have since moved a couple of times, my mother lived in my property since I bought it and played me rent which I have played tax on through a short tax form as it was never that high, so my question is how much roughly will I have to pay the tax man in lay mans terms and is there anyway to reduce it?
Thanks in advance
Irene
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello Irene, I'm Keith and happy to help you with your question.

There is a slight problem. To which tax do you refer? Is it your Income Tax you seek to reduce or possible Capital Gains Tax exposure on disposal?

Please let me know then I can help you further.
Customer: replied 3 years ago.

Hi it is the capital gains tax sorry

Expert:  bigduckontax replied 3 years ago.

Thank you Irene. What you may have to pay in CGT depends on a number of factors. You have to determine the gain which is the selling price less costs of sale and the property valuation as at the date you acquired it. Having determined that you have to work out the ownership time in months. From this remove any time during which it was your sole or main domestic residence and occupied by you. This proportion of the gain will be assessed for CGT. You have an Annual Exempt Allowance of 10K plus Lettings Relief up to 40K to deduct from the gain. The balance will be taxed at 18% or 28% depending upon your income level including the gain in the year of sale.

 

You can see that the matter is far from simple!

Customer: replied 3 years ago.

Hi Keith ,


I can see how complicated it appears but if my memory serves me I lived 40 months in the property from buying it in Dec 1989 til APril 1993 and the sale for flat with all monies exchanged on the 9 April just gone, my income would put me in the 20 percent bracket, I played in total about twenty thousand in estate agent fees and solicitors along with work I had done, the tax office would also have a record of my tax returns to go by, based on this information is there anyway you could give me even a rough idea of what amount I could be looking at?


 


Many thanks


Irene

Expert:  bigduckontax replied 3 years ago.
Love to help Irene, but what was the selling price; you have only told me the costs?
Customer: replied 3 years ago.

Hi I bought it for thirty five thousand, and sold for 429200

Expert:  bigduckontax replied 3 years ago.
The gain is of the order of 429K - 35K - 20K = 374K of which only 130/174 is charged = 279K.

From this deduct your Annual Exempt Allowance of 10K plus lettings relief of 40K leaves you with 229K taxable at 28% (worst case) = 64K possible liability, worst case; ouch. All figures have been rounded. The rate of tax which can be 18% or 28% depends on your income plus the gain in the year of sale.

Any enhancements to the house made in the lettings period eg new kitchen, new bathroom etc is added to the cost price to reduce the gain. Maintenance expenditure can be set against the rental for Income Tax purposes.

I do I have been able to throw some light on your position.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.

Thank you for your support.

 

There was an error in my answer. The last 18 months don't count so only 112/140 is chargeable, sorry. This reduces the estimated taxable gain to 240K.