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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am in the process of selling a property. I bought it in January

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I am in the process of selling a property. I bought it in January 2000 for £34000 and am selling it for £150000. I bought originally to live in. It was a repossessed property with no plumbing, electrical fitments or banister. These I sorted out but have no receipts for.....as I was living in the property and didn't consider it necessary to keep them. My husband then left. I moved back to my parents house and rented the property out. It has been rented out from December 2002 till the present day. All expenses once rented out have been put against my income tax. I file my own tax return and have been onto the government website re capital gains where it has been suggested I may be able to adjust the above gain (£116000) ..... can you advise me? Karen Lester
Submitted: 11 months ago.
Category: Tax
Expert:  TonyTax replied 11 months ago.
Hi. Can you confimr that you lived in the property for all of 2000 and 2001 please. Are you the sole owner? Has that always been the case?
Customer: replied 11 months ago.
Yes I lived in the property from the date of purchase till I rented it out in December 2002. I originally bought it with Simon Quinn, my husband at the time, although he never lived in the house.....he preferred living with my best friend. We divorced in 2003 and I had the house as part of my settlement. I have since been sole owner.
Expert:  TonyTax replied 11 months ago.
Thanks. Leave this with me while I draft my answer.
Expert:  TonyTax replied 11 months ago.
If you sell the property in June 2016 for £150,000, you will make a gain of £116,000 £150,000 - £34,000. You can also deduct the costs of purchase and sale (legal fees, stamp duty, survey fees, selling agent fees). You could estimate the renovation costs in the hope that HMRC don't ask to see proof of the expenditure.Total period of ownership to June 2016: 198 monthsPeriod of owner occupation: 35 monthsPeriod of letting: 163 monthsExempt gain: £31,050 (£134,000 / 198 x 53 months (35 + last 18 months of ownership)Letting period gain: £84,950 (£134,000 / 198 x 145 months (163 - last 18 months of ownership)Gross Non-Exempt Gain: £84,950Letting Relief: £31,050 (lesser of £40,000, £31,050 and ££84,950)Annual CGT Exemption: £11,100Net Taxable Gain: £42,800 (£84,950 - £31.950 - £11,100)CGT is charged at 18% or 28% depending on the level of your income and the gain combined. Look here for information on working out your CGT.Refer to HS283 for information on the main residence and CGT.There may be a possibility of using the value of your ex-husband's share of the property at the time of your divorce as part of the cost as opposed to using £34,000. It depends on the divorce agreement and the decree nisi and decree absolute dates though there may not have been much difference in any event. I hope this helps but let me know if you have any further questions.
Customer: replied 11 months ago.
I have a couple of questions about your reply.....
1. To get the exempt gain and letting gain where did you get £134000 from....did you mean £116000?
2. What is the significance of the "last 18 months of ownership"....is that an exempt period?
3. In the letting relief you are using £31050 as the lessor of £40000, £31050 and £84950.....what is the significance of those three numbers?
4. Net taxable gain you have said is £42800 being £84950-£31950-£11100.....where did you get £31950 from?If I was to put £5000 as an estimate of renovation costs and £2500 as purchase and sale costs and my taxable income is £15000 (total income less costs fees etc) approximately would I be paying in capital gains tax?
Expert:  TonyTax replied 11 months ago.
Hi. Let me take a look at this and I'll get back to you in a bit.
Customer: replied 11 months ago.
Also why have you apparently taken off the £31050 twice? The non-exempt gain is £84950 which I know has £11100 taken off as the annual CGT exemption but why have you also taken off the letting relief.....surely that has already been taken off the £116000 to get to £84950
Expert:  TonyTax replied 11 months ago.
1 Ignore the £134,000 figure. It should read £116,000. The exempt gain at £31,050 is correct.2 If you had looked at HS283, you would have read that where a property has been your mian home, you are given the last 18 months of ownership as an exempt period even if you were not living in it at that time. It was originally introduced to allow people to move home and sell their previous home CGT free within a certain period after having moved out to stop gridlock in the housing market.3 Again, I refer you to HS283. See Example 9. Letting relief is given where a property has been both the owner's main home and it has been let. It reduces the taxable gain. Two of the three numbers are the components of the gain. £40,000 is the most that letting relief can be per sole or part owner of a property. 4 The middle figure should read £31,050. The net taxable gain is £42,800.My aoplogies for the typos.
Expert:  TonyTax replied 11 months ago.
One of the £31,050 figures is the exempt gain which you are entitled to having lived in the property. The other £31,050 is the letting relief. They are two different reliefs. See 3 in my previous post.
Customer: replied 11 months ago.
Thank you for your help.....from what I can see I will have a greatly reduced CGT bill from what I originally thought so I am grateful for your help.
Expert:  TonyTax replied 11 months ago.
Thanks. Good luck with the sale. Would you mind rating my answer before you leave the site please.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15835
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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