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Ash, Solicitor
Category: Property Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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My parents own the house I live in. They bought it in 1988

Customer Question

My parents own the house I live in. They bought it in 1988 for £26000. My brother moved straight in for 7 years and then my parents moved in for 3 1/2 years after that. Then they privately rented it out for 4 years before I moved in 2003. I've been there since and now I'd like to buy it from them. it is valued at £125000 now. They have just had a kitchen (£5000) and bathroom (£3000). Roughly how much CGT will they have to pay? They are both retired.
Submitted: 2 years ago.
Category: Property Law
Expert:  Ash replied 2 years ago.
Hello my name is ***** ***** I will help you.For now please let me know whether they own any other property?Alex
Customer: replied 2 years ago.
Yes they own a bungalow which they live in. Value £180000.
Expert:  Ash replied 2 years ago.
When did they last live in the property you want to buy?
Customer: replied 2 years ago.
roughly 1995 - 1999
Expert:  Ash replied 2 years ago.
What is the value now?
Customer: replied 2 years ago.
As I put in the intitial email, it is valued at £125000 now after they put new kitchen and bathroom in.
Expert:  Ash replied 2 years ago.
Ok. The CG is £125,000 less £26,000 so £99,000. They are allowed £11,000 each which leaves £77,000The following Capital Gains Tax rates apply:18% and 28% tax rates for individuals (the tax rate you use depends on the total amount of your taxable income, so you need to work this out first)The lower rate will apply for income from £0 to £31,785 and higher rate over £31,786.Can I clarify anything for you about this today please?Alex
Customer: replied 2 years ago.
They both just have the state pension as income?
Expert:  Ash replied 2 years ago.
Yes it would. So you take that off the allowance of £31,785 then the difference is lower rate of 18% and balance 28%.If its jointly owned they both benefit from two lots of tax free and then lower rates.Alex