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second home bought for 43,000 sell for £260,000 how much capital

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second home bought for 43,000 sell for £260,000 how much capital gains will we pay. Have a mortgage on it buy to let £140,000.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.
You do not advise whether this property is held in your sole name, or with someone else, and I assume that this has never been your main residence, so
The initial gain will be the sale price less the purchase price (so £260,000 less £43,000 = £217,000)
(This would be split 50:50 if in joint names)
From this £217,000 you can deduct the costs to buy and sell, such as legal and estate agent fees and also the costs of any capital improvements (so not general repairs, but complete improvements such as new bathroom etc)
(Again the costs would be split 50:50)
The amount left over, then has the first £11,000 tax free, as this is the annual exemption allowance (if the property is held in joint names, then 2 x £11,000)
The amount left over then is charged capital gains tax. This is either 18% or 28% or a mix of both.
To work this out, if your annual income is in excess of the basic rate band (£41865) then the gain will be charged at 28%, but if your annual income is less than £41865- then any of the unused rate band will allow the equivalent of the gain to be charged at 18% and then any remaining gain at 28%.
For example, annual income of £30,000 so £11865 unused basic rate band, would allow the first £11,865 of the gain at 18% and any remaining gain at 28%.
Let me know if you have any follow up questions
Thanks
Sam
Customer: replied 2 years ago.

Hi,

We have lived here for the past 29 years my husband and I are joint owners. joint earnings per annum £100,000. We have just bought another property we are having renovated.On this information can you calculate cost. We may rent it out instead if to costly to sell.

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response
If this has been your main residence and not a second home, as indicated, then there is no capital gains tax, as the time you live there (and the last 18 months of ownership if you rent this property out) are covered by private residence relief.
If you choose to then rent it out, and this exceeds more than 18 months, then there will be a capital gain consideration, But you will still be due relief for the time you lived there, plus the last 18 months of ownership and also be due private lettings relief, which can allow up to a maximum of £40,000 exemption from the capital gain.
However if your question relates to the new purchase that you plan to renovate then my original answer remains the same, only capital improvements can be deducted from the gain.
If however you plan to renovate the new purchase and never live there, and do sell straight after you have fully renovated it, then this may not fall under capital gains, but income tax, as HMRC may take the view that this property development is a trade instead. Much will be dependent on whether you have undertaken this before, or plan to do this again.
I can calculate the cost for you, if you advise
1)The purchase and the approx. selling costs
2) Capital improvement costs
3) Each of your annual incomes (the joint position will not allow me to establish who earns what)
Please also advise whether you have done this before, or plan to do this again, as I can then also establish whether in fact income tax is due on any profits made.
Thanks
Sam
Customer: replied 2 years ago.

Thank you we will be moving to the new house when it is finished. We will now sell his house as we will not pay capital gains.

Expert:  Sam replied 2 years ago.
Hi Maria
Thanks for your response
Then as long as the renovations are all completed on the new house within 12 months, then neither the existing home or the renovated property (to become your home) will attract any capital gain (or trade income tax)
Good luck with the new home.
Let me know if you have any follow up questions. However, if you could take the time out to arte/accept the responses, it would be appreciated, as this ensures I am credited for my time.
Thanks
Sam
Customer: replied 2 years ago.

Thank you Sam for your advice. We hope to move in before Christmas the renovations will of taken 9 months.

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response
Then you will have no capital gains to concern yourself with (or income tax) on either property.
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13809
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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