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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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In 1998/99 tax year I inhierited a house. I hadn't lived

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In 1998/99 tax year I inhierited a house. I hadn't lived in it. It belonged to my husband He lived in it. He bought it in 1988 We were separated but not divorced. He died at end of year 1998 and he left me the house. I was then living in France and I subsequently allowed one of our children to live in the house until 2011, when I came back from France to live in it. However I am now 76 and needs are that I sell and find a bungalow - however I see that this may not be a possibility in view of capital gains tax that would be due on the sale of my home. I am finding it difficult to ascertain quite the position and amount due in this respect. So would be grateful for an accurate assessment in view of the details outlined below.
The house became mine in January 1999 - the value then £80,000 valued by solicitor acting on inheritance.
My son had been living in this house also at the time and he continued to live there until 2011 - rent free,
In March 2011 at age 70 - I came back to live in the house.
I am now 76 and am still living in the house.
The house is now worth £290,000 - so a considerable gain.
I have spent approximately £25,000 on refurbishments in 2011 - have the bills.
The selling fees and solicitor fees I've estimated as around £6,000.
So how is my liability calculated. It looks as though I now get v. little for the time I have lived here. Would I be less liable, if I lived here 10 years or even 15 years before selling.
I see I get a discount of £11,100 and some small fraction for the time I have lived here.
I am still rather perpelexed as to the final outcome.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Leave tbis with me while I do some calculations. They will take a while so please bear with me.
Expert:  TonyTax replied 1 year ago.
Hi. Leave this with me while I do some calculations. They will take a while so please bear with me.
Expert:  TonyTax replied 1 year ago.

Hi again.

If you sell the property in, say December 2015, for £290,000 you will make a gain of £179,000 (£290,000 - £80,000 - £25,000 - £6,000). By then you will have owned it for 204 months and you will have lived in it for 58 months.

The gain for the period that the property has been your main home will be exempt from CGT. That accounts for £50,892. Of the remaining gain of £128,108, the first £11,100 will be tax free leaving a net taxable gain of £117,008.

There are two rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year you sell the property. If you sell it in 2015/16, one of the following scenarios will apply:

1 If the sum of your income and the net taxable gain is £42,385 or less, then you will pay CGT at 18%.

2 If your income alone is £42,385 or more, then you will pay CGT at 28%.

3 If your income alone is less than £42,385 but the addition of the net taxable gain take you over £42,385 then you will pay some CGT at 18% and some at 28%.

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

Customer: replied 1 year ago.

So just to verify - I do get credited with the number of years I live in the property. It seemed as though I would only ever be credited 18 months (it used to be 3 years.) I thought I had clarified the (no more than 3 years with HMRC some years back.) I was beginning to see a scenerio of: the longer I stayed, the more would be the profit when I sold the house and more I would have to pay CGT. Yes I had reckoned it would be 28%.

Expert:  TonyTax replied 1 year ago.
You get the last 18 months of ownership as part of your periof of occupation. If you were not living there in that last 18 months, provided the property had at some point been your main home, you would get the last 18 months regardless.

The longer you live there, the greater the main residence relief in percentage terms. Right now, about 28% (58/204) of your gain will be exempt if you sell in December 2015. If you lived in it for another two years, that percentage would increase to about 36% (82/228).
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