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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13943
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I purchased a flat in 2000 and lived there

Resolved Question:

Hello, I purchased a flat in 2000 for 160K and lived there as a primary residence until 2008. It was worth about 350K in 2008. I let it between 2008 and 2016 and it’s now worth about 450K.
When I let it out in 2008 I re-mortgaged it and the mortgage interest has significantly reduced tax liability of the rental income.
I’m now thinking of selling it, partly to fund a larger primary residence and partly due to a worry of increasing tax liabilities. I think the relief on my rental income will reduce soon and I also think that the longer I keep the flat, the more capital gains tax I eventually pay when I sell it (I believe the local market has peaked and will see relatively static capital gain from now on).
Am I right to be concerned about increased liabilities and can you give me an indication of the capital gains tax I would expect to pay if I sold now? I’m a higher-rate tax payer. Thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question
If you sole now your capital gain position would be the sale price less the purchase price = £290,000 initial gain
From this you could deduct the costs to buy and sell (so legal and estate agent fees stamp duty etc) and also the costs for any main capital improvements - such as a new kitchen
But working on the £290,000
Tax relief is then considered - so you are due private residence relief for the time you lived there plus the last 18 months of ownership so from 2000 to 2008 is 12 months x 8 years = 96 months plus the last 18 months of ownership = 114 months out of a possible 192 months (total ownership period)
So private residence relief 114/192 x £290000 = £172,188 is exempt
This leaves a gain to consider of £117,812
Then you have private lettings relief which in this instance you can claim the full £40,000 so this then leaves £77,812
Then the first £11,100 is exempt as this is the annual exemption allowance = £66712 which is the amount liable for capital gains
If you are a higher rate taxpayer -which you indicate that you are then this gain will be liable at 28% = £18679.36 due
The remortgage has no bearing on the capital gains and I am not a financial adviser so could not possibly advise on the whether the market will rise or fall (and I am sure you can appreciate my expertise is tax matters) but just from common sense I agree we have had a good rise which has to stabilise at some point which then may only lead to a slight change either way. But you should seek financial advise on the projected market place
Let me know if I can assist furtehr but it would be appreciated if you rate/accept to reflect the level of service provided.
Thanks
Sam
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Customer: replied 1 year ago.
great advice, very clear, thank you!
Expert:  Sam replied 1 year ago.
Hi
You are very welcome
Let me know if you need any further assistance (please do rate/click accept - thanks, ***** ***** Just Answer credit me for my time )
Thanks
Sam