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bigduckontax
bigduckontax, Accountant
Category: Tax
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I have a property that I bought for £340k in 2012. We are in

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Hi, I have a property that I bought for £340k in 2012.
We are in the process of selling the property for £375k (after extensive refurb) and the land that was the garden for £110k
Unfortunately the house needs to exchange today and complete on Tuesday and the land can't complete until Monday.
Will I be liable for capital gains tax if the house exchanges before the land?
Submitted: 1 month ago.
Category: Tax
Expert:  bigduckontax replied 1 month ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

What were the costs of the refurbishment, please?

Customer: replied 1 month ago.
Hi,I would estimate around £70k, plus we spent a further £10k on an outside office which increased the value of the property.Thanks Keith
Expert:  bigduckontax replied 1 month ago.

Your gain is 485 - 340 - 80 = 65K. Now you say 'we' in your question so I assume you own it jointly with your wife. In that case 65 / 2 = 32.5K of gain is against each of you. Now deduct your non cumulative Annual Exempt Amount (AEA) of 11.3K leaves 21.2K exposed to tax at 18% or 28% or a combination of the two rates depending on the individuals' income including the gain in the tax year of disposal. A worst case scenario is a tax bill of a tad under 6K each.

I do hope that you have found my reply of some assistance.

Customer: replied 1 month ago.
Thankyou - could you confirm if there is a time limit on this.
For example is it based on the date of exchange or completion or is there a period of grace?Thanks
Expert:  bigduckontax replied 1 month ago.

You do not have to declare it until you complete your self assessment tax return at the end of the tax year [5 April]. It does not have to be paid until 31 January in the following year. Any rate of exchange used must be from the HMRC rates which you can find on line.

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Customer: replied 1 month ago.
Hi,Sorry, I may not have explained that well.
I understand that as this is our only residence that there is no capital gains tax to pay if the house and land sale happens at the same time (the land size is small and under the threshold for tax liability)
What I'm trying to understand is whether there is a period of grace for the sales to take place so that capital gains is not a risk?
Expert:  bigduckontax replied 1 month ago.

It it does not matter when the sales are completed, actually it's the contract exchange date that determines the exact time. In any event PRR will apply whenever and however the buildings and land are disposed of.

Customer: replied 1 month ago.
Hi,
What's PRR and why is there liability on the house when it is our only residence?
Thanks
Expert:  bigduckontax replied 1 month ago.

PRR is Private Residence Relief which relieves CGT at 100%. Many people do not realise that when they sell their house at a profit then that is liable to CGT because PRR is given automatically.

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Customer: replied 1 month ago.
are you saying that CGT applies, but the PRR negates it in any case as it is my main residence? IE no tax payable overall?In that case, does it matter whether I sell the house first before the land, as long as I don't keep the land?
Expert:  bigduckontax replied 1 month ago.

As the whole site is withing the permitted area PRR always applies so you can sell whenever and however you like.

Customer: replied 1 month ago.
Thanks, ***** ***** to be clear we could sell the house a day or 2 before the land (was the garden) and the PRR would still apply?
Expert:  bigduckontax replied 1 month ago.

As I said it would not make the slightest bit of difference, PFF would still apply.

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Expert:  bigduckontax replied 1 month ago.

Thank you for your support.

In my last response delete 'PFF', insert 'PRR!'