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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13997
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Sam, As you were very helpful last week with my tax questions,

Resolved Question:

Sam,
As you were very helpful last week with my tax questions, I thought to send this CGT question to I need to know how much CGT there would be to pay by my mother-in-law as she is selling her house as she has just moved into a care home.
The house was purchased in 1987 for £16,120 in joint names with my father-in-law.
My father-in-law passed away in October 2010, my sister-in-law was given power of attorney mother. She continued to live in the house until August 2011 when she moved in with my sister-in-law as she needed care. My sister-in-law rented out the property the same month. She has submitted tax returns on behalf of her mother income and other pension income.
My mother-in-law was put into a care home last week and my sister-in-law put the house up and has now accepted an offer of £108,000.
Please can you advise what capital gains tax implications/amount there will be to pay on the sale of the property mother-in-law and if there are any other financial implications she should be aware of/liable for.
My sister-in-law has not given much consideration to CGT but as she has power of attorney, she has gone ahead with everything without consulting the rest of the family. I would be grateful if you could please advise the estimated tax amount due so I can advise her that she will have to leave aside a lump sum to pay out of the money from the sale and also will need to put aside tax income 14/15 tax return.
I know you will need exact figures costs of the sale but I won’t know that until later this week.
• My mother-in-law is 85 years old
• Purchase price of house in 1987 - £16,120 (Joint names)
• Rented out in August 2011 to present
• Agreed sale price £108,000
• Expected date of transaction to complete – end of February 2015 (cash purchaser)
• My mother-in-law’s annual income including rent, pensions etc - £22,000
Please let me know if you need any other information.
Many thanks,
Mary
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Mary
Thanks new question and asking .
The approx. capital gain will be
Sale price £108,000 less purchase price £16120 = £91,880 from which the costs to buy and sell can be deducted (I shall estimate this as £1500) leaving £ 90380
And the costs of any major improvements, such as new kitchen etc - which are deemed to be capital costs can be deducted
Then the property has been owned from 1987 (you do not indicate a month so I shall use June 1987) and will be sold Feb 2015
So total period of ownership 331 months
She had this as her main residence months so the private residence relief and the last 18 months of ownership - total of 308 months (which is exempt as her private residence is
308/331 x £90380 = £84100
This leaves a gain of £6280
The you have private lettings relief, as this was once her main residence this is the lesser of
1) amount of private residence relief due which is £84,100
2) The amount of gain left over after private residence relief has been applied - which is £6280 OR
3) £40,000
As the lesser amount is 2) the amount of gain left over after private residence relief has been applied - so £6280 this is then deducted from the remaining gain £6280 - there is NO capital gains to pay.
This is without using the annual exemption allowance - which allows the nest £11,000 of gain to be exempt and without taking into account the exact costs to buy and sell OR the costs capital improvements on the property.
Thanks
Sam
Customer: replied 2 years ago.

Sam

Thanks very much answer. That's really good news. Does this need to be included in the CGT section of her Tax Return /5 even if there is no gain?

Thanks

Expert:  Sam replied 2 years ago.
Mary
Yes but only because the gain has been reduced due to the entitlement of the private lettings relief, although if we missed this out, and then just considered the remaining gain within the annual exemption allowance, then you could avoid this, IF no self assessment was completed.
But as self assessment is completed I would always advise make the declaration showing the fact that there is no charge arising, so you, you Mum in law, and your sister in law know the full position has been made clear to HMRC.
I know one of my fellow experts on here would advise otherwise - but I'm a great believer in doing things right - I find it leads to a simpler and less stressful life !
Enjoy the rest of your weekend
Thanks
Sam
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