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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15933
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I Capital gains tax

Customer Question

I bought a property in 1998 and lived in it for 3 years whilst re-wiring it etc. I then rented it out. In 2004 I took out a new mortgage on it so that I could add my wifes name to mortgage and borrow some money. My wife stupidly got rid of all the paperwork in 2004 relating to the mortgage I originally had with Halifax from 1989-2004 so we only have the new mortgage details showing we borrowed £75k on house valued at £260k. We have tried asking Halifax for closing statement but have had no reply to date as it is over 10 years ago since we had that mortgage. As I am now disabled and unable to work I sold the house in August 2013 and now need to fill in capital gains tax form. Do I work out the gain from the first cost of the house in 1989 which I think was £80k or from the cost in 2004 of £260k (valuation) when wife and I took out new mortgage?

Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

The basic calculation of a capital gain on a property sale is very simple. You deduct the sum of the purchase price and associated costs of buying and selling (legal fees, stamp duty, survey fees, selling agent fees etc) from the sale proceeds. The value of the property when it was let is irrelevant as is the amount of any mortgage secured on it. Take a look at HS283 for more information on the main residence, capital gains tax and letting relief.

I'd be happy to do the calculations for you. Let me know if you'd like that. If you would, I will need to ask for further infromation but won't do that until you have decided either way.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

You don't seem to have answered my query which is do I use the original purchase price in 1989 when I bought it on my own or the purchase price for the property in 2004 when I took out a new mortgage with my wife on the same property.

Expert:  TonyTax replied 3 years ago.
I did answer that question. I said:

"You deduct the sum of the purchase price (1989) and associated costs of buying and selling" and "The value of the property when it was let is irrelevant as is the amount of any mortgage secured on it". HS283 specifically makes the point that the value of a property when it was let is ignored (see page 4).

To put it another way, you ignore the value of the property when it was let as far as your calculation of the capital gain is concerned. It is the original purchase price in 1989 that you need to use plus the cost of any improvements to the property, not the costs of everyday repairs.

I hope that clarifies thing for you.

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