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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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If someone is a part owner in a property which is sold and

Resolved Question:

If someone is a part owner in a property which is sold and that person owns no other property and is in fact renting a place to live in, does he have to pay capital gains on his share of the profits and is there any way to avoid this?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.

Hi

Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.

I am afraid capital gains will arise as you are disposing of a share you hold in a property that you advise has never been your main residence, the fact you are renting yourself and hold no other property has no bearing I am sorry to say. If the property had been empty for the ownership period (not rented out) then you could have made an election for it to be treated as your main residence, but this would had to have been made within 2 years of acquiring said property. so this would be of no use to you at this time.

The rate can be just 18%, just 28% or a mix of both, If you are a higher rate taxpayer (annual income in excess of £41785) then the gain after the annual exemption allowance and costs and major improvement would all at 28%

If your annual income is less than £41785, then the amount of any unused basic rate band can be used to allow the equivalent of the gain at 18% and any remianing gain at 28%.

And just for information non doms do have to pay tax pre 05/04/2015 if they sold and spent less than 5 years out of the UK,in which case had a tax liability to declare in their country of residence and since 06/04/2015 will ALL be liable to capital gains on any sale of property in the UK - But either way everyone pays tax somewhere where - contrary to the belief that UK exemption means worldwide exemption - as it does not!

So I hope that eases matters for you a little as I can appreciate your frustration were that to be the case.

Let me know if I can be of any further assistance with your question.

Thanks

Sam

Customer: replied 1 year ago.

Dear *****

I was told that if you had made "losses" in the relevant tax year you could offset these losses agains the cap gains tax. If rent can't be considered a loss, what could be considered a loss? Also how does HMRC work out what has to be paid at 18% and what is paid at the mind-boggling 28%? Thank you.

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
Yes that's correct if you have capital losses they indeed can be offset against any gain made.
But rent losses sadly are not capital losses - so I have no idea who advised you of this as not at all correct
Rental income is a completely different tax regime and can only be used to offset against future rental profits
Capital losses would be for example selling shares and getting back less for them than the amount purchased for, or selling another property and again getting less money for it than was purchased for etc
As for the rates of tax - as advised above
The rate can be just 18%, just 28% or a mix of both, If you are a higher rate taxpayer (annual income in excess of £41785) then the gain after the annual exemption allowance and costs and major improvement would all at 28%
If your annual income is less than £41785, then the amount of any unused basic rate band can be used to allow the equivalent of the gain at 18% and any reminiscing gain at 28%.
So if you had an annual income of £30,000 for the tax year in question, you would have £11785 unused basic rate band .
So if you made a gain of £20,000 after the annual exemption allowance - then the first £11,785 would be at 18% and the remaining 8215 ould be at 28%
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13704
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you
Customer: replied 1 year ago.

Based on what you say about how the 18% and 28% is calculated, then if you are in receipt of Job Seekers Allowance for the relevant tax year, then presumably all of the cap gains would be at the 18% rate then....? The amount of the gain is likely to be about £80,000 in this case.

Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
If the gain in full is £80,000 - and this is all your share then if based on the fact your Jobseekers (plus share of any rental income) is less than £10,600 for the year then your first £31185 of any gain would be at 18% and any remaining gain at 28%
If your income is in excess of £10,600 then the amount of gain at 18% would be less (and more at 28%)
And if the gain is £80,000 entirely and just £40,000 is your share - then the rates as advised above.
Let me know if I can be of any furtehr assistance, but it would be appreciated if you could rate me for the level of service I have provided (or click accept) this ensures Just Answer credit me for my time
Thanks
Sam
Customer: replied 1 year ago.

Dear *****

The total gain for each of the part owners is likely to be £80,000, so I will work on your first calculation. I presume when we get down to the wire after the sale that HMRC will tell us what to pay, rather than us having to work it out.

I will certainly do your rating to make sure you get your credit. Thank you

Liz

Expert:  Sam replied 1 year ago.
Hi Liz
You will need to complete a self assessment tax return for HMRC (if you do not complete one already, which you will do if there has been rental income from this property) - so if you fill in the old style paper version - then HMRC will tell you what you owe.
If you arrange to fill an online version of this - then the computer online program works it out for you.
Let me know if you wish help with the calculation - (just to give you a rough idea of what you will owe) and I would just need to know an approx annual income figure for the year.
Once the property is sold, just let HMRC know - so they can arrange to issue you with a self assessment tax return request after the end of the tax year (after 5th April) BUt they will issue you with a self assessment unique taxpayer reference number - under which the tax returns will be processed.
You then can set up online services (once you have this 10 digit unique taxpayer reference) OR ask to be sent a paper version of the tax return,
And do feel free to come back for any assistance you need with its completion (whether online of paper!)
Thanks
Sam

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