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 Sam Your Own Question
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13915
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
16196420
Type Your Tax Question Here...
Sam is online now

I brought my flat in July 2006, Lived there until April 2010,

Resolved Question:

I brought my flat in July 2006, Lived there until April 2010, then rented it out (as market was poor).
Since January 2015 it has been empty & on the market, & now sold STC, I except to make approx £19000.00 profit.
Gross salary tax year 14-15 approx £45800.00
Q1. if I bank the profit approx how much CGT would I be Liable for?
Q2. if I reinvest the profit into another property would I be liable for any CGT?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Hi

Thanks for your question

I am afraid you will be liable to capital gains consideration whether you invest in another property or not.

But assuming you have declared all the rental income to HMRC - you are due private residence relief for the time you lived there and the last 18 months of ownership

So you owned the property (so far) for 105 months and lived there for 46 months - so 46 months plus last 18 months of ownership allow 64 months with private residence relief.

£19,000 gain x 64/105 = £11580 exempt for private residence relief (PPR) and leaves £7420 gain

So then private lettings relief is due (assuming you declared all rental income to HMRC) and this is the lesser of

1) the amount of gain on which PPR is due - so £11580

2) The amount of gain left over after PPR has been applied - so £7420

3) £40,000

As the lesser amount is 2) the amount iof gain left over after PPR has been applied - so £7420

Deducted from the reminign gain of £7420 - leaves NIL capital gains to tax.

But I will add even without the private lettings relief ,as the gain was only £7420 and your annual exemption allowance is £11,000 then you still have no taxable gain!

So NIL to pay - you can bank all of the £19,000 tax free. Just ensure you alert HMRC of the sale.

Thanks

Sam

Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thanks
Would I have to submit a CBT form or just write to HMRC to inform them of the sale?
Expert:  Sam replied 2 years ago.

Hi

Thanks for your response

If you already complete self assessment (which I suspect you do - as you are in receipt of ental income) then you just need to add in the capital gains tax section of the 2015 return (if the sale takes place before 05/04/2015)

If you do not complete self assessment tax returns - then you can either telephone and ask them to set you up for a self assessment tax return for the year OR fill in an online request for self assessment - link here

https://online.hmrc.gov.uk/shortforms/form/SA1

The reason you have to declare this sale is because your NIL position is first and foremost due to your entitlement to private lettings relief - and HMRC need to be aware of how the gain has been calculated and how the tax reliefs have been applied)

If you wish a more accurate calcualtion once the sale has taken place, do come back to Just Answer, and you can always ask for me Sam Tax - and if another expert interjects (as the lock of any newly posted question releases afetr 15 minutes) just advise you would like to wait for me - as I am online every day.

Let me know if you have any follow up questions, but in the meantime, it would be much appreciated if you could rate (or accept) the answers I have provided, as this ensures that Just Answer credit me for my time

Thanks

Sam

Sam and other Tax Specialists are ready to help you