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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3823
Experience:  FCCA FCMA CGMA ACIS
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Question forCustomerHello, Further to our previous

Resolved Question:

Question forCustomerHello,
Further to our previous conversation, I would like to ask if you could please calculate the capital gains tax for us, based on the following facts:
1. A flat was bought in July 2000, in auction, for £63,000 (jointly with my wife).
2. The flat was sold on 20/4/2016 for £207,000.
3. The selling expenses are £2,864.
4. The purchase expenses are £1,509.
5. There are about £20,000 renovation capital expenses (approximately)
6. In Easter 2003, my wife and I moved into the flat and used it as our own residence for about 5 weeks.
7. On 02/03/2016, my wife and I also moved into the flat and used it as our own residence until the day of the sale.
8. The flat was let apart from the two periods mentioned above.
9. For 2015-2016 tax year, our income was almost £0 (we had rental income from the flat and from another property, but we also carry forward losses from previous tax years) and there have been no other transactions that could give rise to capital gains tax (no losses, no other gains)If you could please give us a detailed calculation, it would be great.Many thanks
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, thank you for asking for me. Here is the detail. Acquisition price is 63K + 2.864K + 20K = 85.864K Selling price was 207K - 1.509K = 205.491K. Capital gain is 205.491 - 85.864 = 119.62K As this was a Joint Tenancy that is a gain of 59.813K each. Now deduct 11.1K non cumulative Annual Exempt Amount (AEA) of 11.1K leaves 48.713K exposed to Capital Gains Tax (CGT). As you occupied the flat both before and after the letting period you may be entitled to Lettings Relief (LR) up to 40K. CGT will be levied at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. Unfortunately losses elsewhere cannot be used to offset rental income so a larger proportion of the gain will be taxed at 28%. Worst case scenario is a tax bill of just under 14K each, assuming that LR is not allowed as you occupation times are marginal. I do hope that you find my reply of assistance.
Customer: replied 1 year ago.
Hello KeithThank you very much - this was very useful.
You have calculated the gain to be £48713. The losses that we carry forward are related to past rental income and in all our tax returns so far have been offset against rental income for each year. So for 2015-2016 we nada round £11,000 rental income each, and around £9,000 losses each. Can you please let us know the capital gains tax based on these figures. Am I right to think that the first £32k will be charged at 18%, leaving the £48k-£32k = £16k exposed to 28%?
If you could please do the calculation fir us, based on the above income details, it would be great.
Many many thanks
Expert:  bigduckontax replied 1 year ago.
Your surmise is correct save that the first 32K plus your Personal Allowance of 11K making 43K chargeable at 18%, the balance at 28%. Assuming you do not get LR then 48.713K gain would be, as you have some 2K income will be, 41K @ 18% [7.38K] and 7.712K @ 28% [2.16K]; total CGT payable 9.56K say a tad under 10K each. Rather less than the original 14K I quoted, better than a poke in the eye with the proverbial sharp stick. Please be so kind as to rate me before you leave the Just Answer site.
Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.