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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My wife and I are selling a second house that we bought for

Resolved Question:

my wife and I are selling a second house that we bought for £128,000 in December 2001, for a sale price today of £235,000. we lived in the property as our main and only home for exactly 4 years between 2007 and 2011. We rented the property out for 2 years between 2005 and 2006, and for for 4 years between 2011 till now. My wife and I are both retired and both basic rate tax payers, my gross income is £30,000 and my wife's is £22,000. What is the capital gain tax that we will have to pay.
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Hello and welcome to the site. Thank you for your question.

Please allow me to carry out CGT calculation.
I will revert to you shortly.

Many thanks
Customer: replied 1 year ago.

I await your urgent reply

Expert:  taxadvisor.uk replied 1 year ago.
David, thank you for your reply.

You say you bought the property in Dec 2001 and lived in the property as your main and only home for exactly 4 years between 2007 and 2011.

The property was first let in 2005... what happened during the years 2002-2005 before the property was let?

Many thanks
Expert:  taxadvisor.uk replied 1 year ago.

David, thank you for your patience.

Based on information provided, the good news is that there is NO CGT payable on gain made as it is covered by reliefs and allowances as follows:
- Private residence relief for the period the property was your main residence
- Final 18 months of ownership as the property was your main residence as some point during period of ownership
- Letting relief to cover period let during period of ownership
- Gains annual exempt amount £11,100 each.

More information on PRR is covered in HMRC helpsheet hs283 here
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief

CGT calculations
Sale of property£235,000
Cost price£128,000
Capital improvements£0
Agents fees, solicitors fee and other costs - say£0
Total cost price£128,000
Gain on sale£107,000
Period of ownership - months156
Period as main residence - months48
Private residence relief - months66
(there is an additional relief to cover last 18 mths
of ownership (HS283 - example 9 )
Potential capital gain£107,000
Gain covered by private residence relief
(66/156) x 107,000£45,269
Gain subject to capital gains tax (107,000-45,269)£61,731
Letting relief - maximum£45,269
This is lower of
- £40,000 per owner£80,000
- Private residence relief£45,269
- Gain on the part of the property that's been let£61,731
Net chargeable gain after letting relief£16,462
Gains allowance - £11,100 per owner£22,200
Gain chargeable to CGT-nil-

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 1 year ago.

There was of course solicitors when we purchased the property, and there will be solicitors fees when we sell the property. Also there has been agents fees and other costs, insurance, gas inspections etc. will this make any difference to you nil CGT calculation and put us into tax liability or not?

Expert:  taxadvisor.uk replied 1 year ago.
David, thank you foryour reply.

The costs you have mentioned would reduce your overall gain.
The end result would still be NIL CGT payable.

I hope this is helpful.
taxadvisor.uk and other Tax Specialists are ready to help you

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