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Question re Sale of a rented property... I have a property

Customer Question

Question re Sale of a rented property...
I have a property which I have always rented out.
I now want to sell it to a friend. Current value is approx £450k, but I want to sell to her at £350k.
Can that cause a problem? Could the £100k somehow be assessed as a gift? Would it therefore be subject to the seven year rule? Advice please!
Regards, ***** *****.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello Nick, I'm Keith and happy to help you with your question.
Whichever way you play it you will be liable to Capital Gains Tax (CGT) on the gain made. The gain is calculated by taking the market value (less selling costs) of the property on disposal and deducting the original price plus costs and any improvements eg installation of central heating, double glazing, extensions etc but not routine maintenance which would be allowable against the rental income for Income Tax purposes. This gain is then taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. But soft, all is not lost, you may well be entitled to Entrepreneurs' Relief which limits the tax to a flat rate of 10%.
Furthermore, CGT does not apply to the full gain made as for the last 18 months of ownership you are deemed to be in occupation even if this is not the case. Take the full period of ownership in months. Take the period of letting out in months less 18. The second figure over the first is the proportion of the gain subject to CGT.
As regards ***** ***** sale price here is UK Govt's general synopsis on this:
'Your gain is usually the difference between what you paid for your property and the amount you got when you sold (or ‘disposed of’) it. Use the market value instead if:
It was a gift (there are different rules if it was to your spouse, civil partner or a charity)
You sold it for less than it was worth to help the buyer'
I do hope I have shed some light on your situation for you.
Customer: replied 2 years ago.

Many thanks for your very full answer!

Please confirm a couple of points if you would...

I can offset any gain against losses on share trading...

I can utilise the annual CGT allowance...

Many Thanks, ***** *****.

Expert:  bigduckontax replied 2 years ago.
You can indeed offset any gain with losses from share trading in the same tax year. You can also mop up any losses brought forward from earlier tax years against the gain.
Yes, I should have mentioned the matter of your Annual Exempt Allowance of 11K which may be used to offset any gain also. Normally I put that in automatically, I must have been having a brain storm earlier!
Please be so kind as to rate me, Nick, before you leave the Just Answer site.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3598
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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