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bigduckontax, Accountant
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I have a question about Capital Gains Tax. I understand that

Resolved Question:

I have a question about Capital Gains Tax. I understand that it is only paid on the gains or profit from disposing of an asset. Lets say for example that a property sold had gained 100k over 8 years.
When you sell that property how much capital gains tax would you have to pay out of the 100k gain?
I understand that there is also a tax free allowance where you don't pay any capital gains tax - roughly 11k. Is this the same as the income tax free personal allowance of roughly 11k or a totally separate allowance specifically for capital gains? In other words, in the tax year that you sold the property in - would you still get the tax free personal allowance of up to 11,000 as you would in normal years without any capital gains. A working example would help. Thank you!
Submitted: 11 months ago.
Category: Tax
Expert:  Sam replied 10 months ago.

Hi

It would be on the full £100K less the annual exemption of £11,100 (this exemption is just for capital gains, you still have a personal allowance to use against income)

Not sure what you mean by a working example

Income less personal allowances £11,00 - whats left over liable to Income tax and National Insurance and

Capital gain less annual exemption allowance £11,100 - whats left over liable to capital gains tax

Do let know if I can assist further

Thanks

Sam

Customer: replied 10 months ago.
OK
So income allowance is 11,000 and captial gains is 11,100. And they are separate. But...If you pay higher rate Income Tax
You’ll pay 28% tax on your gains if you’re a higher or additional rate taxpayer.If you pay basic rate Income Tax
You’ll either pay 18% or 28% tax on your gains if you’re a basic rate taxpayer. How much you pay depends on the size of your gain and taxable income.Work out how much taxable income you have - this is your income minus your Personal Allowance and any other Income Tax reliefs you’re entitled to.
Work out your total taxable gains.
Deduct your tax-free allowance from your total taxable gains.
Add this amount to your taxable income.
If this amount is within the basic Income Tax band for the 2015 to 2016 tax year, you’ll pay 18% Capital Gains Tax. You’ll pay 28% on any amount above this.Please walk me through this
If I sell a property and make 100,000 gains
and my taxable income in that year is 18,000, then how much Capital Gains tax would I pay?Could you please also check your typing as some of your numbers are typos even if your advice is great and your maths very good! :)
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. I see my colleague has opted out.

25K of the gain will be subject to 18% tax [4.5K] and 75K at 28% [21K], total CGT due 25.5K.

I do hope that helps.

Customer: replied 10 months ago.
It does but i think you're wrong! Have you factored in the 11,100 CGT allowance on gains? The gains are 100k but after this allowance 88,900 would be taxable not 100k? please could you clarify this and re-work the above example.
Many thanks
Expert:  bigduckontax replied 10 months ago.

I has assumed that you had allowed the Annual Exempt Amount of 11.1K. Therefore only 75K - 11.1K = 63.9K would be at the 28% level, say 18K so some 22.4K due.

Customer: replied 10 months ago.
thank you.
And what are the rules on making a flat you previously rented out a residential property (you live in it for a period of time)How long do you have to live in the property to be exempt from Captial Gains Tax altogether?Many thanks
Expert:  bigduckontax replied 10 months ago.

Then in addition to the Annual Exempt Amount (AEA) the following rules apply.

Take the total ownership time in months . Take the letting period in months less 18 [A] (for the last 18 months you are deemed to be in residence even if this is not the case). A / B is the proportion of the gain subject to CGT and you also are entitled to Lettings Relief (LR) up to 40K to offset any gain in addition to the AEA.

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Customer: replied 10 months ago.
OK i will as you have been very helpful but that last answer is slightly unclear. I see an A but no B.
Could you just finish by calculating from the example.
100k gains BEFORE 11,100 allowance. Over an 8 year period has been let for all but 12 months. so let for 84 months out of the 92.
Many thanks
Expert:  bigduckontax replied 10 months ago.

The letters were to indicate the relevant months to calculate the proportion. 66 / 92 say 72% of the gain exposed to CGT less AEA and LR.

Customer: replied 10 months ago.
what you're saying is - to ask again about my example.
total months owned asset 96 months (8 years)
minus 12 months when I actually lived in it. (not necessarily 12 months continuously)
minus 18 months as you said above (even if I was renting it within the last 18 months)
That is a proportion of 66 / 96 which is approx 69%So if the gain is 100,000
AEA takes it to 88,900
LR takes it to approx 48,900?So the CGT is paid on 48,900 at either 18% or 28% depending on income etc.Is this correct?
Expert:  bigduckontax replied 10 months ago.

You have it to a 'T' to use an old expression!

Customer: replied 10 months ago.
this really is the last question) assuming the latest example, how much of the 48,900 is taxed at 18% and how much at 28%? Assuming my taxable income is 18,000 in the same tax year.
Many thanks
Expert:  bigduckontax replied 10 months ago.

25K of the gain will be subject to 18% tax [4.5K] and 23.9K at 28% [say 6.7K], total CGT due 11.2K.

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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3814
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 10 months ago.
thank you!
Expert:  bigduckontax replied 10 months ago.

Thank you for your support.

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