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bigduckontax
bigduckontax, Accountant
Category: Tax
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We have a family home which is now let out and we need to

Customer Question

hello we have a family home which is now let out and we need to sell it in a year or so. how much capital gains will we have to pay. property purchased jointly in 1997 for 150k and we lived there till 2004 and have rented it since then till now. its worth about 700k now. looking for a rough indication of what we need to allow for CGT.
Submitted: 10 months ago.
Category: Tax
Customer: replied 10 months ago.
i can add some detail if it helps. we have done some maintenance over the years, eg new kitchen, bathrooms etc. this cost about 20k about half was when we lived there and about half after. We dont have any of these receipts tho.My wife is a low rate tax payer (about 18k pa) and i am a high rate tax payer now, but intend to retire soon so could delay selling when my income is about 25k. probably sell in 2017.
Expert:  bigduckontax replied 10 months ago.

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!

Customer: replied 10 months ago.
thanks keith! its late so i will go to bed now and look at that in the morning. its not 29 years though, say purchased in 1997 and sell in 2017 thats 20 years. may be you can double check that bit .thank you!
Expert:  bigduckontax replied 10 months ago.

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.

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 10 months ago.
thanks, ***** ***** sense I think. Only thing I did not understand is the 18% or 28% split, what determines how much you pay in each?
I have rated you!
Expert:  bigduckontax replied 10 months ago.

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.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3590
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 10 months ago.

It has now! Thank you for your support/

Customer: replied 10 months ago.
thanks. could you just tell me how you get the 40k lettings relief please. the Letting relief is a total figure not each right?
Expert:  bigduckontax replied 10 months ago.

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.

Customer: replied 10 months ago.
ok thanks i think i get all the pieces in the puzzle now!
Expert:  bigduckontax replied 10 months ago.

Yes, it's not that simple, is it!

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