Hello, i am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
You will be entitled to Private Residence Relief (PRR) for the time you lived there plus the last 18 months of ownership as you are deemed to be in occupation even if this is not the case. Actually the calculation for CGT is worked out in months, but I will be able to give you a rough steer.
Your total ownership time is 29 years and your let period 15.5 years. Thus 15.5 / 29 [say 54%] of your gain on sale is exposed to the tax. Gain is 700K - 150K = 600K, at 54% is 320K. Now deduct 11.1K non cumulative Annual Exempt Amount (AEA) and 40K Lettings Relief (LR) leaves say 270K taxable. this is taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. A worst case scenario is a bill of some 75.5K.
Your question said we. if this is jointly owned with your spouse then the gain is split half each 135K per head. Both receive the AEA and LR so the bill might be substantially reduced to say 47K worst case between the two of you.
I do hope that you have found this quick canter through CGT of assistance. By the way, any gain is net of purchase costs, selling costs and any improvements eg installation of double glazing, central heating extensions etc but not routine maintenance which can be set against rental income for the let period as can the interest element of any mortgage. Confused, you will be!
For me its early morning as I am in a time zone 6 hours ahead of BST just now.so I'll have another look for you to wake up to in the morning. There are a number of slips in my calculation, but, as my old boss was wont to say, it doesn't alter the price of cheese.
You are quite right, but it doesn't change things much. 11.5 / 20 is 57.5%. Knock off 20K from the gain reduces it to 300K, 150K each, Knock off 11.1K and 40K leaves 89.9K. Your wife's share will be 25K @ 18% and 75.9 @ 28%. Your share would be 18K @ 18% and 71.9K @ 28%. i make that a total bill of a tad over 46K which is all but what I originally said, pure luck there!
I hope I have set your mind at rest on this one.
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Take the 32K 20% tax bracket and add the personal allowance of 11K, that gives you 43K. Deduct income for the year leaves a figure which is taxed at 18% and all the rest at 28%; simple as the meerkat in the TV advert would say!
Small point, the rating has not come through yet.
It has now! Thank you for your support/
LR is available up to 40K so in view of the relatively long letting period I assumed that the whole entitlement would apply. Both husband and wife receive the relief.
Yes, it's not that simple, is it!