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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15940
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Can you please comment on our Capital Gains Tax liability in

Resolved Question:

Can you please comment on our Capital Gains Tax liability in the following case.
My wife, daughter and I purchased a flat in Scotland in Nov 2006 at a cost of £125,495 (total cost including duty and fees was £127,209) which our daughter occupied whilst at Uni and after until Oct 2012 when our son took up residency. He has since vacated the flat in May 2014 when it was rented out. As we now need to sell we are wondering what tax liability the three owners will have?
Thank you in anticipation
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

In what proportions is the property owned? I will need to know what it is worth if you want an idea of the CGT situation. When will the letting cease?

Customer: replied 2 years ago.
Hi Tony thanks for the response.
The property is owned in equal share by myself, wife and daughter. With regards ***** ***** value I can only estimate a sale price of £165,000 at this time, I appreciate that a tax liability may vary subject to a final sale price. With regards ***** ***** rental this will cease prior to sale which would be anticipated to be July this year.
Thank you.
Brian
Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.

Hi again.

You should refer to HS283 here for information on the main home and CGT as this will be relevant to your daughter.

If you sell the property for £165,000 in July 2015, you will make a gain of £37,791, £12,597 for each of the three joint owners. Once you deduct the costs of selling (legal fees, selling agent fees etc), the gain for each of you will be lower.

As far as each of you and your wife are concerned, you are each entitled to an exemption from CGT for the first £11,100 of gains you make in any one tax year so, assuming you have no other gains in the tax year you sell the property and that you sell it in 2015/16, you will each be left with a net taxable gain of £1,497.

There are two rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that you and your wife will pay will be determined by the levels of your respective incomes in the tax year the property is sold. One of the following scenarios will apply to each of you for a 2015/16 disposal:

1 If the sum of your income and the net taxable gain is £42,385 or less in 2015/16, then all the taxable gain will be charged to CGT at 18%.

2 If your income alone is £42,385 or more in 2015/16, then all the taxable gain will be charged to CGT at 28%.

3 If your income alone is less than £42,385 in 2015/16 but greater than £42,385 when the net taxable gain is added, then part of the net taxable gain will be charged to CGT at 18% and part at 28%.

As far as your daughter is concerned, she will be entitled to relief from CGT for the period that she lived in the property and for the last 18 months of ownership. That will account for £10,797 (£12,597 / 105 months x 90 months). The balance of the gain of £1,800 is taxable but will be covered by the annual CGT exemption of £11,100 your daughter will be entitled to for 2015/16. She wiill have no CGT to pay.

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

TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Tony thanks for the detailed and simplistic response which even I can grasp! A smiley face from me!
Best regards
B
Expert:  TonyTax replied 2 years ago.
Thanks. I try to make things easy to follow.