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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13914
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I would like to know1. How much capital gain tax

Resolved Question:

Hello,I would like to know1. How much capital gain tax my husband needs to pay on selling his property
2. Will I need to pay capital tax? If any, how much capital gain tax I need to pay on selling my propertyWe got married in Sept 2014. He bought his flat in Jan 2013, and lived there until Aug 2013. He moved in with me in Sept 2013 letting out his flat since then. He declared the rental income in HMRC and has been paying the tax. The property remains in his sole name. His tax rate bracket is 45%my husband’s flat1) the purchase price, £327500 in Jan 20132) expenses Stamp Duty, £10500, legal fees(buying & selling) £3000, mortgage application fees £1000, real estate agent fee £175003) the selling price for £540000 in Feb 20164) capital expenditure as bathroom refurbishment : £500my flat1) the purchase price, £325000 in Jan 20132) expenses Stamp Duty, £10000, legal fees(buying & selling) £2000, mortgage application fees £1000, real estate agent fee for selling (will be around) £80003) the selling price for £580000 in Dec 20174) capital expenditure as bathroom refurbishment : £200005) the flat has been our main residence never been let, but we will move to a new flat he is buying in May 2016, after he sells his flat. The new flat will be our main residence and I will let my flat till I sell it.Thank you very much.
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
Sorry, by mistake, I posted the same question.
Expert:  Sam replied 1 year ago.
Hi Thanks for the new question The capital gain position would be as follows Sale price £540000Less purchase price £327500Initial capital gain £212500Less purchase and selling costs £32000Less capital improvements £500So gain £180000PPR (private residence relief) 8 months living there plus last 18 months = 26 months PPR out of total ownership of 37 monthsSo private residence relief (PPR) 180000 x 26/37 = £126486So new gain to consider £53514 Then Private lettings relief which is the lesser of1) PPR2) Gain left over after PPR3) £40,000 as £)£40,000 is the lesser deducted from £53514 - final gain to consier £13514 Then the first £11,100 is exempt leaving £2414 liable to capital gains x 28% = £675.92 Your flat has no capital gain - as its always been your main residence to date and as you plan to move out and let it out - as long as yous ell within 18 months there will be capital gains, but if you plan to keep the flat longer - then the gain will be considered in the same way as the calculation above. Thanks Sam
Expert:  Sam replied 1 year ago.
But as you can see even your husband has a very small gain , so you too will benefit from private residence releif and private lettings relief and the annual exemption Thanks Sam
Customer: replied 1 year ago.
Hello Sam,Thank you very much. Although I appreciate your calculation shows the process clear, my initial calculation was correct, which you were telling me it was wrong.. I guess I did not express my method very clearly to you.So, it seems like my husband and I can apply the private residence rule all the time although we have two properties most of time, right? For example, his new flat will be entitled to be a main home.Thank you very much.
Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
I cannot see any further calculation you have provided other than you thinking £9000 was liable to tax which is not the case as only £2414 is liable ???
Anyhow you now have the correct and full calculation to use as a guide.
And whilst in your specific (and also husbands) case you remain having an entitlement for PPR on more than one property at a time (that run parallel) this is NOT due to the fact you can apply it all of the time or the fact you have two properties or that you are married but because of your specific circumstances and the appropriate entitlements and the time lines in which they are permitted.
Maybe you are just wording it a little too simplistically but I need you to see that the reliefs have been awarded due to the facts and the timeline and no other reason.
And its important I make this clear rather then agree with your statement to make it easier !
Thank
Sam
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Customer: replied 1 year ago.
Hello Sam,I understand your point on private relief. Thanks.About my calculation, the reason the number is ***** is I used different numbers. I only needed to know if my method is correct, I used approximate numbers. I used profit after expenses as £200k, and the percentage is also rounded.
[ The profit after expenses of his property will be £200k. Then, the lesser amount will be £40k? 1) £200k, 2) £60k (70% is relief as of today) 3) £40k. If so, the bot***** *****ne of taxable income will be 200k - 140k - 40k - 11k = 9k ? ]Many thanks.
Expert:  Sam replied 1 year ago.
Hi Thanks for your explanation but you had to work out the private residence relief first and apply it and then apply the lesser amount of the private lettings relief which had not appear to have been undertaken. But as long as you have it straight in your mind with the correct method, then that is the most important factor :) Thanks Sam