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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15882
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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We bought a house for my student daughter and friends to

Resolved Question:

We bought a house for my student daughter and friends to live in in 2009 for 270k. We charged them, but not her rent. I am now selling. It is valued at 370k. I have put a new kitchen in the house within the last year. How much capital gains will I need to pay? Can it be reduced in anyway?
Submitted: 9 months ago.
Category: Tax
Expert:  TonyTax replied 9 months ago.

Hi.

Is the new kitchen a significant improvement on the old one? How much did it cost? Is the property owned solely or jointly?

Customer: replied 9 months ago.
Hi, the old kitchen was falling apart. £30,000. I now own the property myself as my husband died in 2010.
Expert:  TonyTax replied 9 months ago.

Thanks.

Can you tell me what your annual pre-tax income is please.

Customer: replied 9 months ago.
I have an NHS pension £28k, I worked part-time (2days) as a teacher £600/month. £600/month rent. Both of the last two incomes have now stopped.
Customer: replied 9 months ago.
Are you still there?
Customer: replied 9 months ago.
I prefer messaging to phone call, but I can't get the phone call pop up to go!
Customer: replied 9 months ago.
Did you receive my figures?
Expert:  TonyTax replied 9 months ago.

I'm still here.

Expert:  TonyTax replied 9 months ago.

I have your figures. When did the teaching salary and the rent stop?

Customer: replied 9 months ago.
Thank you. my tenants moved out on 31st July this year. My teaching contract ends at the end of this month.
Expert:  TonyTax replied 9 months ago.

We don't need a phone call which will cost you more. I can answer your question through the message system.

Customer: replied 9 months ago.
Thank you.
Expert:  TonyTax replied 9 months ago.

Thanks.

Leave this with me while I do some calculations. They will take a while so please bear with me.

Customer: replied 9 months ago.
No problem. I understand. Thanks for letting me know.
Customer: replied 9 months ago.
Without wishing to be rude, this is still all within the £32 isn't it?
Expert:  TonyTax replied 9 months ago.

Yes.

Expert:  TonyTax replied 9 months ago.

The cost of the property for CGT purposes will be the sum of half the purchase price in 2009 and half its value in 2010 when you husband passed away. I'll use £270,000 as the cost for my answer. If HMRC allow the kitchen cost, that will reduce the gain to £70,000 (£370,000 - £270,000 - £30,000). The annual CGT exemption of £11,100 will leave you with a net taxable gain of £58,900.

The level of your income dictates the rate or combination of the CGT rates (18% and 28%) that you pay.

Your income in 2016/17 will be about £33,400 (NHS pension £28,000 + teaching £3,000 + rent £2,400). Your personal allowance of £11,000 will leave you with a taxable income of £22,400 which will be taxed at 20%. That leaves £9,600 of the basic rate tax band to be used by the capital gain. So, £9,600 will be taxed at 18% (£1,728.00) and £49,300 will be taxed at 28% (£13,804.00). The total CGT liability will be £15,532.

If you sell the house in 2017/18 (after 5 April 2017) for the same price, you may pay less CGT as your income will probably be lower. If you only had your NHS pension of £28,000, you would pay CGT at 18% on £15,000 (£2,700.00) and at 28% on £43,900 (£12,292.00). The total CGT liability would be £14,992. I have used the same allowances and tax bands but these ***** *****ge.

The costs of buying and selling the property (legal fees, stamp duty, survey fees, selling agent fees etc) can be deducted from the gain so they will reduce your CGT liability.

I hope this helps but let me know if you have any further questions.

Customer: replied 9 months ago.
This is great, really helpful. Thank you so much.
Expert:  TonyTax replied 9 months ago.

Thanks.

Would you mind rating my answer before you leave the site please.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15882
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Customer: replied 9 months ago.
I am happy to do that.
By the way, my teaching salary was after tax but I think I still have a good idea of what's what.
Thank you very much Tony
Expert:  TonyTax replied 9 months ago.

That will make quite a difference.

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