How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Sam Your Own Question

Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13779
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
16196420
Type Your Tax Question Here...
Sam is online now

We are in the process of selling our house and are concerned

Resolved Question:

We are in the process of selling our house and are concerned about capital gains liability. It is a property that we have lived in as our primary residence and then rented when we moved out into a new purchased residence. We need to figure out how much money we will have left after the sale of the rental property and after our capital gains deductions so that we can figure out how much we can put down as a deposit on a new home. There is a deed of trust in place on the property.
Thanks
Simon
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question and for asking for me
Are the deeds on House 1 also in your wifes name? Because as a married couple,e the split has to be represented by the legal ownership document (deeds) and then in joint names 50:50 unless you have evidence to prove that the ratio split of contribution differs from this.
By doing this you may also have risked losing out on vital tax reliefs for this being your main residence for a period of time and this trust being put in place when your wife does not seem to be included on the deeds nor then any transfer taking place whilst she lived there.
So can you clarify
1) Has your wifes name ever been on the deeds for this property
2) If the deeds are in joint names then what ratio did the declaration of trust change the ratio split to (from 50:50)
3) Did you girlfriend/wife ever live at this property
4) Exactly how the £60,000 was spent - to see is its allowable
5)Has all rental income been declared to HMRC and has it ALL been declared as your wifes income
6)How much is this property worth now
7) Approx costs to buy (stamp duty legal fees etc and approx how much to sell with legal and estate agent fees
Thanks
Sam
Thanks
Sam
Customer: replied 1 year ago.
Hi Sam
I just replied in the chat box but dont think it worked. it tried to charge us again.
1) Has your wifes name ever been on the deeds for this property - No
2) If the deeds are in joint names then what ratio did the declaration of trust change the ratio split to (from 50:50) - The deeds are not in joint names. The declaration of trust gave my wife 99%
3) Did you girlfriend/wife ever live at this property - yes for around 6 months
4) Exactly how the £60,000 was spent - to see is its allowable - plumbing, electrics, gas, boiler, stairs, kitchen, bathroom, decoration, plastering
5)Has all rental income been declared to HMRC and has it ALL been declared as your wifes income - The rental income was included in my tax returns for 2013/14/15. We made a loss on this due to cost of repairs and maintenance so we were unable to assign any income to my wife from this
6)How much is this property worth now - £505,000
7) Approx costs to buy (stamp duty legal fees etc and approx how much to sell with legal and estate agent fees - When I bought the house in 2012 stamp duty was £5,300 against the purchase price of £307,250. Fees were about £1,000 for legal. Selling the agent fees are £5,000, we have a mortgage redemption figure of £6,000 and legal fees of £1,000Did you get the long narrative I sent in the notes section before?
I bought a house (house 1) in April 2012 in my sole name for £307,250 and spent around £60,000 on renovations and improvements. I lived in this property until July 2013.In July 2013 I bought another home (house 2) with my then girlfriend now wife and moved out of house 1, putting it on a buy to let mortgage.
House 1 has been rented since July 2013.In June 2015 we put a declaration of trust in place on house 1 to enable my wife to take the income from the property as she is not working. She is deeded 99%
We have not been able to take an income from the property as yet as profits from the monthly rental have been put back into the house to repair tenant related damages. We pay £993 a month on the interest only mortgage and associated insurance costs. The current mortgage amount outstanding is £281,282.08.We are selling house 1 due to financial pressures for £505,000 and will complete by the end of March.
There is a £6,000 redemption figure against the mortgage.The house would have been rented from July 2013 through to March 2016.We are selling house 1 to buy house 3 and will rent out house 2 for 12 months and then sell.What will we have to pay in capital gains tax on the sale of house 1?
We need to know how much money we will have left after the sale to enable us to understand how much deposit we will have for our next home.
Customer: replied 1 year ago.
we can always change the deed of trust or cancel it if that makes a difference.
Expert:  Sam replied 1 year ago.
Hi
Thanks for your response
Its not charging you gain - its asking you to pay me with the deposit you placed - so I am credited for the work -
I have received your reply and just wanted to let you know I will get right onto drafting a reply but just wanted to let you know I had the information
Thanks
Sam
Customer: replied 1 year ago.
Oh .. how do I pay you then... it says in my email I have paid?
Expert:  Sam replied 1 year ago.
Hi
Thanks for your responses
As your wifes name has never been on the deeds the declaration of trust is inlaid as far as HMRC are concerned and all the rental income was yours to declare (although you could have then paid your wife to manage matters for you - thereby reducing your liability ! (Although as you had losses I am not even sure why you felt the need to have this declaration of trust?
How has the £6000 redemption charge come about on the mortgage - I assume that this is part of buy to lets and early redemption?
But your capital gain position is as follows
Sale price less purchase £505,000 less £307,250 = £197750
Less capital improvements £60,000
Less costs to buy and sell £6400 and £12000
So we have an initial gain of £119,350
Then we have to consider that private residence relief is due - so you lived there for the period from April 2012 to July 2013 - so this 16 months and the last 18 months of (34 months) are due private residence relief, and the total ownership period was April 2012 to approx March 2016 48 months
So Gain £119,350 x 34/48 = £84540 is exempt
This leaves a gain of £34810 to consider
Then you have private lettings relief which is the lesser of
1) The amount of gain on which private residence relief is due £84540
2) The amount of gain left over after private residence relief has been applied - so £34810
OR
3) £40,000
As the lesser amount is 2) the amount of gain left over after private residence relief has been applied - you are left with NIL gain and NIL capital gains liability
(Plus you still had the first £11,100 as your annual exemption allowance)
So whilst you will declare this position on the 2016 self assessment (relevant to year end 05/04/2016) you will have nothing to pay
Thanks
Sam
Expert:  Sam replied 1 year ago.
Hi
You have paid Just Answer but by clicking accept on my answer (or rating me) this payment then goes from Just Answer to me
Thanks
Sam
Customer: replied 1 year ago.
Thanks for this Sam. We can share this information with the accountant who does our tax returns to make sure he declares all of this correctly for 2016. This is a great weight of our minds.We put the declaration of trust in place as we thought we would make some profit from it last year but the tenants caused a lot of damage which had to be repaired.If we want or need tax advice in the future for house number 2 (that we plan to sell in 12 months) can we come back to you directly or should we come through this site?Thanks Sam.
Simon and Jai
Customer: replied 1 year ago.
Oh .. and yes the £6,000 is the early redemption figure from the mortgage company.
Simon
Expert:  Sam replied 1 year ago.
Hi Simon
Fab idea, and you can copy and paste - and if he.she needs any more assistance - do then get them to contact me via Just Answer.
As things are the declaration of trust would not have been valid as you are spouses and your wife's name was not on the deeds and you clearly provided the purchase in the first instance and then for the latter buy to let.
But this is not needed which is brilliant!
If you need future help you will need to come via Just Answer - as we are not permitted to deal directly with customer which have come about through our affiliation with Just Answer or we would end up having lots of lovely clients with out own accountancy business and Just Answers UK tax forum would melt away !
(And then the redemption costs are allowable and I built those into the calculation for you)
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13779
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and other Tax Specialists are ready to help you

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.com/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.com/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.com/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions