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bigduckontax
bigduckontax, Accountant
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I plan to sell a house in London Details are given below

Customer Question

I plan to sell a house in London Details are given below
Purchased it for £ 285,000
Repair expenses were £ 20,000
Every month paid Interest Only on Mortgage £ 1400 per month for 7 Years = £ 117,600.However
Rent received for 7 years 1200 per month 100, 800 therefore we had to pay£ 21,800 from our own pocket
Now we are selling this property for £ 350,000 where as we have already incurred 41,800 pounds. that only gives us a profit of £ 24,200
What will be the capital gain tax for having earned £ 24200
my email id is sarala 1948 @yahoo.co.in
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

Repair expenses are only allowable against rental income received as indeed are the interest element of the mortgage payments, sorry. You are already in a loss situation there. They are not available to offset capital gains.

Your capital gain is 350K - 285K = 65K. You say 'we' so I assume that you have this property as a joint tenancy with your spouse and my advice is based upon this surmise. That means 32.5K gain each; from this you can deduct your annual exempt allowance of 11K reducing it to 21.5K. Additionally, you may be entitled to Lettings Relief (LR), but this is generally dependent on you occupation of the house as your sole or main domestic residence at one time or another during your ownership period. LR is extremely complex, but is a very useful tool as it can reduce gains by up to 40K. So you may have your CGT substantially reduced. CGT if payable is levied at 18% or 28% or a combination of both rates depending on the level on individual income including the gain in the year of sale. A worst case scenario is 28% of 21.5K = 6K each tax due.

Please, in the interests of identity theft please do not disclose your email address on an open site.

I hope I have helped you. Sorry it isn't quite in the way I suspect you were anticipating.

Customer: replied 2 years ago.

Dear Keith


 


Thanks for your prompt help. I fully appreciate your efforts and excellent service. Please read below additional information


 


Property is in joint nam e with my new both of us are from India


 


He left UK in 2010.. he has no income in UK since then I am still in London


 


I worked as SW and retired at the age of 65 in september 2013. I get monthly pension of £172 from my employers and 56 pounds per month


I worked from 2005 to 2013 .


 


where and how to pay this amount


 


With this additional information, please recalculate and tell us how much each person will pay


 


It is Indeed a very unhappy situation


 


Property is in Strtatford. Our assumption was that wherever in the world


Olmapics takes, place properties prices go up drastically


 


Due to recessasion, for this property prices went down and now again it is coming up


 


but we want to get out of this ASAP


 


await your reply so that we are able to pay CGT , once hopefully the deal is over in September 2014


 


 


 


 

Expert:  bigduckontax replied 2 years ago.
Any gain has to be declared on your respective self assessment tax returns for 14/15. These must be submitted to HMRC by 31 October 2015 if on paper or 31 January 2016 if on line. Any tax due is payable on 31 January 2016. HMRC will advise the exact amount due on receipt of the returns and give directions as to payment methods also. At this stage no repayment calculation is appropriate, but see below.

Here is the HMRC advice on non residents CGT on property sales in the UK of UK property:

'If you left the UK on or after 17 March 1998 you would need to be not resident and not ordinarily resident in the UK for at least 5 full tax years between the year you left the UK and the year of your return.'

This may well influence the intended date of sale.

This could, as you appreciate, alter the position considerably.

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