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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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, I have recently sold part of a garden in a house I own

Resolved Question:

Hi,
I have recently sold part of a garden in a house I own and I would like to know if I need to pay Tax on the sale and how I inform HMRC about the sale.
I bought the house for £208,000 in Mar 2003 and lived in it until Aug 2008. I then rented it out from Aug 2008 to Dec 2014. I have just moved back into the house. The house has recently been valued at £250,000.
I have had no other capital gains in this Tax Year. The land Buyer paid all my legal fees. I am married, but the property is solely in my name. The land sold is quite small, 4 metres by 6 metres. There is no Mortgage on the property.
Many thanks.
Paul
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me how you received for the part of the garden that was sold please. Is the size of the total plot that you bought including the land on which the house itself sits no more than half a hectare in size?
Customer: replied 2 years ago.

i received a cheque for £12,000. The land, including the house, is alot less than 1/2 a hectare.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.

Hi again.

As you have disposed of part of your property, the proportion of the cost of the property that is allocated to the part sold is based on the A over A + B formula where A is the part disposal proceeds and B is the value of what is still owned. So, if you divide £12,000 by £262,000 and multiply the result by £208,000, you get the cost of the part of the garden sold which is £9,527. The gain is therfore, £2,473.

As the property was let for 77 months out of a total ownership period to date of 141 months to December 2014, a proportion of the gain is not exempt from CGT. This will be £1,351 (£2,473 / 141 x 77). The exempt gain will be £1,122 (£2,473 / 141 x 64). I have a feeling that letting relief which would be £1,122 in this case is only calculated on a final disposal but I will check that and get back to you. Either way, you will have no CGT to pay unless your total gains exceed the annual CGT exemption of £11,000.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15850
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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