How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3116
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

/ Madam, I have a tenancy in common with my ex-wife

Customer Question

Dear Sir/ Madam,
I have a tenancy in common with my ex-wife (now deceased) on a property I bought in 1965 for £4000. She lived there up until her recent death; but I stopped living there about 15 years ago.
My wife bequeathed her 50% of the property to my two children. The house has now been sold for £150,000. I wish to know whether or not I am liable to capital gains tax, and if so, would it apply to the whole value of the property or just the 50% which I 'owned'? The value of the house in 1982 was about £45,000 (a desirable area in Caerphilly).
I would be pleased to have your professional advice on this matter. And if I am liable for CGT please advise me of the figure for which I would be liable to pay to the taxman.
I would appreciate your early reply so that I can make provision for it in the settlement.
Thank you
David Rees
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello David, I'm Keith and happy to help you with your question.
You are certainly liable to CGT on the gain made on the sale, but only 50% of that applies to you ie your 50/50 share. Under the UK CGT regime the gain is deemed to rise evenly with time. We all know it doesn't, but that's how it works. To determine the amount of gain to be taxed proceed as follows.
Take the total ownership period in months,
Customer: replied 1 year ago.

Hello Keith,

I only got part of your answer up to period in months, can you resend please.

Expert:  bigduckontax replied 1 year ago.

Sorry I hit the wrong key, I will continue!

Total ownership period is say 600 months. Residence by you 420 + 18 [438] (you are deemed to be resident in the last 18 months of ownership even if this is not the case). 600 - 438 = 163 so of the 50% of the gain applicable to you 180 / 600 = say 27% will be liable to CGT.

The gain is calculated from the acquisition price and the net selling price. The acquisition price is the purchase price plus costs plus any improvements eg installation of double glazing, central heating, extensions etc. The sale price is the selling price less costs of sale. Your question is silent upon these matters so on the face of it the gain to be taxed is 150K - 4K = 146K / 2 = 3K @ 27% = say 20K.

CGT is levied at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale, worst case scenario is a tax bill of 5.6K. You declare the gain on your self assessment tax return for the tax year in which the sale takes place.

Your question is silent as to costs on purchase and sale or any improvements so my ball park figure probably needs adjustment.

I do hope I have been able to assist you with your question.

Expert:  bigduckontax replied 1 year ago.
Sorry, I have a dodgy '7' key; 146K / 2 = 73K taxed worst case at 28%.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3116
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.

Please accept my apologies, I have mislead you slightly by failing to draw your attention to your Annual Exempt Allowance (AEA) of 11K [11.1K, 15/16]. I also put a typo into paragraph 3 of my answer; delete '27%,' insert '28%.'

The AEA would reduce the gain to 62K with a worst case tax of 17.36K tax. Deep apologies, I hang my head in shame.

Thank you for your support.

Customer: replied 1 year ago.

Hello Keith,

Further to my enquiry of 27/3/15 (06:15), here is my additional info./ corrections so that you may give me a more accurate figure for my CGT liability. Thank you for your message confirming that I am entitled to a tax allowance of £11.1K (this was a question that I was going to raise in this enquiry).

The sale price of the property, after costs, was £147,019. My 50% share = £73.5K . The original purchase price + costs = £4.5K. Therefore the gain is £69K, which I presume can be reduced to £57.9 after deducting the tax allowance?

Also I carried out the following improvements:

Attached brick garage = £900 (late 60s)

Front porch = £800 (late 70s)

Rear extention = £1200 (ditto)

2 first floor rooms over garage = £4500 (earlier 80s)

Central heating installed = £1000 (late 70s)

Gas conversion = £700 (80s)

New gas boiler and rads = £1500 (90s)

Double glazing throughout = £4800 (early 20s)
Total = £15,400
Additional queries/ info.:
I am 80 yrs of age and my total income is about £15K per annum. Will this have any bearing on the calcs.?
My wife lived at the property rent free for 12 yrs. but left no assets for my children (except 50% of property). I therefore agreed to split the proceeds three ways (33.3% each). Is there any allowance I can claim for making this gift to my children?
Because of the 'recession' in the local housing market, the value of the house had remained stagnant for the last couple of years.
When I receive your calculation for CGT, what is the minimum info. I will need to declare on my Self-assessment return?
I am sorry my enquiries are so long-winded but I hope that you will be able give me an answer within the next couple of days so that I can advise my solicitor of the figure she would need to take into account for CGT. Please advise if there is an additional fee to be paid on my part.
Thanking you in advance for your help.
David Rees
Customer: replied 1 year ago.

Hello Keith,



Further to my enquiry of 27/3/15 (06:15), here is my additional info./ corrections so that you may give me a more accurate figure for my CGT liability. Thank you for your message confirming that I am entitled to a tax allowance of £11.1K (this was a question that I was going to raise in this enquiry).



The sale price of the property, after costs, was £147,019. My 50% share = £73.5K . The original purchase price + costs = £4.5K. Therefore the gain is £69K, which I presume can be reduced to £57.9 after deducting the tax allowance?



Also I carried out the following improvements:



Attached brick garage = £900 (late 60s)


Front porch = £800 (late 70s)


Rear extention = £1200 (ditto)


2 first floor rooms over garage = £4500 (earlier 80s)


Central heating installed = £1000 (late 70s)


Gas conversion = £700 (80s)


New gas boiler and rads = £1500 (90s)


Double glazing throughout = £4800 (early 20s)
Total = £15,400
Additional queries/ info.:
I am 80 yrs of age and my total income is about £15K per annum. Will this have any bearing on the calcs.?
My wife lived at the property rent free for 12 yrs. but left no assets for my children (except 50% of property). I therefore agreed to split the proceeds three ways (33.3% each). Is there any allowance I can claim for making this gift to my children?
Because of the 'recession' in the local housing market, the value of the house had remained stagnant for the last couple of years.
When I receive your calculation for CGT,what is the minimum info. I will need to declare on my Self-assessment return?
I am sorry my enquiries are so long-winded but I hope that you will be able give me an answer within the next couple of days so that I can advise my solicitor of the figure she would need to take into account for CGT. Please advise if there is an additional fee to be paid on my part.
Thanking you in advance for your help.
David Rees

Expert:  bigduckontax replied 1 year ago.
You follow up question indicates that you have sold in the current tax year in which case your AEA would be just 11K.
So on your figures:
73.5k - 15.4k - 11k = 47.1K liable to CGT. Worst case scenario is a tax bill of say 13.2K. It will, of course be less than that as some of it will only be taxed at 18%.
You just declare the gain along with your normal self assessment tax return on a Form SA108 at boxes 30 to 36 and Box 34 gives you the figure for Box 1. You only need totals for this return.
Customer: replied 1 year ago.

Dear *****,

I have been away for a few days, hence the delay in responding. Thanks for your reply, but I still need clarification on my CGT liability in case I get it wrong.

On 27 March you advised that the "worst case scenario is a tax bill of £5.6K" (rate of 28% but no deduction for AEA or improvement costs on the property)

On 2 April you refer to a "worst case scenario of a tax bill of say £13.2K" after taking the above into account. But no allowance has been made for the 73% of the time that the property was my premier residence (i.e 27% liability).

My share of the property was £73.5K. If I deduct £15.4 for improvement costs and £4.5 for the original purchase price, it leaves a 'gain' of £53.6K.

On the basis of your earlier calculation, my liability is 27% (438 out of 600 months residence) of £53.6K, which is £14.47K. I assume that it is at this stage that this can then be reduced by my AEA allowance of £11K. This leaves a taxable figure of £3470.

28% of £3470 gives £972. But because my annual income is only about £15K, the rate levied would probably be only %18. (less than £32010?). This would mean that I would only owe the taxman less than £1000?

If my calculations are incorrect, please advise where my figures are incorrect or where I have made wrong assumptions. A reasonably accurate figure is needed by my solicitor so that she can make allowance for CGT liabilities in her final account. I can deal with the taxman later in the year.

Sorry that my enquiries are dragging on a bit, but I hope that this will be the last time I will need to seek your assistance.

Regards,

David Rees

Expert:  bigduckontax replied 1 year ago.

You appear to be correct in your assumptions, David.

You will owe under 1K in CGT. 14.47K - 11K = 3.47K @ 18% = 0.6246K tax due. Remember that if you exchange in the 15/16 tax year the AEA is 11.1K which will reduce your liability a tad to 0.6066K.

Customer: replied 1 year ago.

Dear *****,

Thanks for your confirmation of my CGT calculations. I will not trouble you further on this matter.

Best wishes,

Dave Rees

Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance, Dave.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.com/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.com/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.com/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions