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TonyTax
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, I bought a property in December 1998 and lived in it

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,
I bought a property in December 1998 and lived in it until August 2008. I rented the property out from September 2008 until May 2013 and sold the property in June 2013.
The gain after the purchase price and costs of sale are taken into account is £415k
The house was let out the entire 4 years and 11 months following the date when I moved out.
Private residents relief gives me three years relief after I have moved out meaning that 23 months out of 175 months are taxable, this is equivalent to 13% of the total gain = £54,000. Is this right?
My understanding of the reliefs is that I can also claim lettings relief in addition to private residents relief, and that this is the lower of the exempt gain (£361k), the chargeable gain (£54k) or the maximum lettings relief (£40k).
My calculation is that this would reduce the chargeable gain after the available reliefs to £14k, which after my annual exempt amount would mean that I paid 28% tax on the balance of £3k - a total tax payment of just under £1,000 on the whole gain.
This would be such a relief and seems too good to be true - please can you advise if i have worked this out properly. (Numbers are rounded). I have pulled this calculation together from the various leaflets available online and need some confidence that I have worked it out ok before i submit it.
Thanks,
M
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
.

Leave this with me while I check your calculations.
Customer: replied 2 years ago.
If you want to the penny numbers let me know
Expert:  TonyTax replied 2 years ago.

again.

I'm assuming you owned the property solely.

If you include the first month as a month of occupation by you which you can do since you moved in within 12 months of buying the property, you lived in it months and let the property months out of a total period of ownership of 175 months.

The exempt gain is £362,829 (£415,000 /175 x 153). The non-exempt gain is £52,171 (£415,000 / 175 x 22). Letting relief of £40,000 reduces the non-exempt gain to £12,171 and the annual CGT exemption of £10,900 reduces it further to leave you with a net taxable gain of £1,271.

CGT would be at 18% or 28% or a combination of the two rates depending on the level of your income in 2013/14. The worst it can be is £355.88 (28%).

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

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15883
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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