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bigduckontax
bigduckontax, Accountant
Category: Tax
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Does the capital gains allowance include your income ? I earn

Customer Question

does the capital gains allowance include your income ?
I earn £16k a year and have 8000k difference between purchase of property and sale.
Do I declare it as capital gains with my self assesment?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to assist you with your question. There is no actual Capital Gains Tax (CGT) Allowance as such. There is, however, an Annual Exempt Amount (AEA) of 11.1K which is effectively the same thing. Your gain on the property, assuming that the house it was not your sole or main domestic residence, Is below the AEA so no CGT will be due. You would declare the gain on your annual self assessment tax return. If the property in question was your sole or main domestic residence then you would be entitled to Private Residence Relief which is 100% of the gain. The AEA is a 'use it or loose it' [HMRC speak] allowance; it does not accumulate from year to year. The only time your income would come into a CGT computation is if you do have some tax to pay which would be at 18% or 28% or a combination of the two rates depending on your income including the gain in the relevant tax year. As you do not have any CGT you do not have to worry yourself about the rate. I do hope that my reply has been useful.
Customer: replied 2 years ago.

so you think I should fill in the part of my self assessment that asks about capital gains and it should calculated 0 tax due ?

It was my home for 31 months then let for 30 months

during my time of living in it I converted the loft to make a third bedroom and had the whole house rewired. total spent during my living there £7000

The house was then empty for 4 months at the end of tenancy.

House bought £90k sold for £98K.

Many thanks

Expert:  bigduckontax replied 2 years ago.

No, you merely declare the 8K gain and HMRC will allow the AEA automatically in the absence of any other capital gains. The conversion counts as an improvement and inflates the acquisition price for CGT so, if you have not taken it into account in the 8K, your actual gain is a mere 1K.

In your case you can forget about the period let; the gain is so low that those various elements do not come into play at all.

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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.