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bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I am selling a house that I have owned since 1981. The house

Customer Question

I am selling a house that I have owned since 1981. The house was originally purchased in joint names for £13,500 and a further £3,500 was borrowed during the mortgage period between 1981 and 2006 when it was paid off in full. In 2007 my partner and I split up and I paid her £60,000 for her share of the house. At this time I spent around £15,000 on a new kitchen, bathroom and windows. I moved out of the house later in 2008 to live with a new partner but my son lived there until 2011 though he did not pay me any rent. In October 2011 I rented the house to some bad tenants who left the property in a poor state of repair. They left in April 2015 and I have again spent a further £5000 in repairs though most of this was decoration and refurbishment including £1,800 for a new boiler. My son is intending to buy the house which has been valued at about £130,000 but I am reducing the price to £115,000 to help him out. I have no idea how to calculate my capital gains tax liability. I am 61 yrs old and am retired with an occupational pension of about £20,000 and part time earning of around £3000.

Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer and happy to help you with your question. Firstly forget about any mortgage payments, they do not come into the Capital Gains tax (CGT) computation. Any interest element paid during the time of letting may be used to offset rental income and reduce your Income Tax exposure. Your gain is computed as follows. 13500/2 + 60000 +15000 +1800 = 83550 is the acquisition price. The disposal price is at the current market value, not the discounted price to your son, so that is 130000. The gain is thus 46450. Not all this gain is subject to CGT. Effectively only the period in which you were not in occupation and you are deemed to be in occupation for the last 18 months of ownership even if this is not the case. You occupied for 27 [adjusted] years and owned for 34 years. Thus only 5.5 [16%] of the gain is exposed, say 7.5K. As you have an Annual Exempt Amount of 11.1K you incur no CGT liability and there will be no tax to pay. You can forget about the complications of Lettings Relief as there is no need for these to kick in and therefore it need not be calculated. Accounting Web gives the following advice [edited] on post tenancy repairs: 'Simply put, if you have a rental property, end it (as in, the tenants leave and you make no attempt to replace them), then you put right wear and tear from the tenants and sell it, the repairs are the last of your rental expenses (as they arose due to the rental business, though after it had ceased).' I do hope that my reply has been of assistance.
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Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Customer: replied 1 year ago.

Hi Keith, thank you that is very reassuring! So, I have no need to advise HMRC of the sale of my property? I will be giving you a positive rating.

Expert:  bigduckontax replied 1 year ago.

In the information box on your presumably 15/16 self assessment tax return just advise them that you have disposed of your sole or main domestic residence.

Thank you for your support.

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