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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4996
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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During this tax year I have sold a property which was transferred

Resolved Question:

During this tax year I have sold a property which was transferred to me by my parents. The total amount gained was £117000. I am self employed and do not normally pay tax as my income from a partnership is below the tax threshold. I assume I will have to pay capital gains tax on this. I own my own property which I live in. I have some outstanding debts on credit cards of £20000 and would like to pay this off and use the other amount to build a property on our land adjacent to our current home to rent out to provide further income. Would I have to pay the full amount of capital gains tax on the sale amount or can I offset paying off cc debts and the cost of the new build? My end of year is fast approaching.
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Your question is "Would I have to pay the full amount of capital gains tax on the sale amount or can I offset paying off cc debts and the cost of the new build?"

Capital gain tax is chargeable on the gain made. You claim your gains annual allowance (this tax year £11,000) from the gain and the balance will be taxed at a combination of both 18% and 28% beacuse you have other income albeit below the personal allowance.

I am sorry to say you cannot offset the paying of cc debts and the cost of ne built from the gain before calculating CGT due. Paying off the debt has nothing to do with the actual gain and the same applies to money spent on a new build.

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.

Can it be offset against anything other than capital losses? Would it be beneficial to use ISA to the maximum amount or is there anything else we could do?

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

A capital gain can only be offset against capital losses when you are dealing with sale of private property as in your case.

Application of sale proceeds/gain in the form of investing in ISAs or another private property etc does not reduce the chargeable gain for CGT puposes, I'm afraid.

If the property was held jointly with your spouse the both of you would claim gains allowance of £11,000 each before the gain is taxed. Furthermore if your co owner has no other income than bulk of her share of gain would be taxed at 18% and not 28%.

I hope this is helpful.
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Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes.