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Sam
Sam, Accountant
Category: Tax
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Bought a property for £200,00 with a £60000 mortgage - costs

Resolved Question:

Bought a property for £200,00 with a £60000 mortgage - costs £7077.79 in fees , just sold for £260,000 ( Less 60,000 mortgage redemption and £4120 expenses) What am I looking to pay ? Joint ownership with my wife ? No othe capital gains this year ?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question
Can you advise
1) When you bought this property, and confirm it was purchased in joint names with your wife
2) Whether you have ever lived in this property - if so provide dates
3) Whether you have let this property out to tenants and if so dates please, and whether all rents declared to HMRC
4) the date the property was sold
5) The costs of any capital improvements such as new kitchen new bathroom etc
6) Your normal annual income (and if the property was in joint names, your wifes annual income too)
I can then provide you with a calculation (for each if in joint names)
Thanks
Sam
Customer: replied 2 years ago.

Property purchased 28th February 2006 in joint names interest only mortgage of £60,000.Never lived in the property Yes -rented to Tenants until September 2014 - all income declared to HMRC . the property sale is not completed yet - expected completion February 20th 2015.My annual income about £33000 ( pension and State pension. My Wife about £6,000 pa.

Expert:  Sam replied 2 years ago.
Hi
Thanks for your response and providing the information requested.
So we have a gain of sale price £260,000 less purchase price £200,000 so an initial gain of £60,000
Less costs to sell and buy so £7077.79 and £4120.00 - total of £11197.79 to deduct - leaving £48,802.21
You do not indicate any capital improvements to the property - so this leaves a gain of £48802 split 50:50
You £24,401
Wife £24,401
For each of you there is the annual exemption allowance of £11,000 so
£13,401 gain each
For you the first £8865 of the gain is liable to 18% tax = £1595.70 and the remaining gain of 4536 x 28% = £1270.08 - so total capital gain bill of £2865.78
For your wife her gain of £13401 will just be liable to 18% = £2412.18
You should advise the gain on the 2015 self assessment tax return for you both and any tax due - will need to be paid no later than 31/01/2016
Do let me know if you have any further questions on the information I have provided,
Thanks
Sam
Customer: replied 2 years ago.

Have to payback £60000 mortgage !So actual gain is "00000 less expenses of £11197 ?!!

Expert:  Sam replied 2 years ago.

Hi

You do not have the mortgage as a deduction as well!

You had already had the full purchase price deducted from the gain! (If you had the purchase price of £200,000 and £60,000 it would suggest the cost to buy was £260,000 which it was not)

SEE HMRC advise on how to calculate the capital gain - you can see the mortgage has NO Bearing at all!

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

Thanks Sam

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