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Sam, Accountant
Category: Tax
Satisfied Customers: 14195
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I purchased my family home in Gloucestershire on 17 Aug 1998

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I purchased my family home in Gloucestershire on 17 Aug 1998 for £167,000 and sold it in 13 Apr 2007 for £390,000 after my wife died after I nursed her thru brain cancer for 4 years.
On 19 June 2004 I purchased a flat in London for £197,000 for use by myself and family for business, recreational, shopping and educational purposes and when I sold the family home I moved into this flat (13 Apr. 2007) which then became my only property. My intentions to pursue my business in London did not pan out and I sold the flat on 20 June 2008 for £325,000. HMRC are now saying I owe them CGT. What do you think I should do?

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

I am sorry to hear what a difficult time this has been, and may I offer my condolences.

I am sorry to say that HMRC are right, you will owe capital gains on the sale of the last - as from the date of purchase (16 June 2004)to 13/04/2007 - this was not your main residence, and capital gains will arise to reflect this period of time.

So you should accept that HMRC are correct in their decision, and make a full declaration.

The initial gain is the sale price £325,000 less the purchase price of £197,000 - which amounts to £128,000
But first from this £127,000 you can deduct the purchase and sale costs (so any stamp duty, legal and estate agent fees etc - and the costs of any major improvements, such as new kitchen or bathroom.

Once these amounts have been deducted then the relief is considered for the fact this was your main residence so the calculation
The time you lived here/total ownership period x gain then allows you establish the element exempt under the private residence relief rules.

The figure left over has the first £9600 tax free as this is your annual exemption allowance, and any remaining gain is charged at a flat rate of 18%

So without the costs to buy and sell and any capital improvements, the £128,000 less £9,600 = £118,400 x 18% = £21,312 (but the gain will be less with the allowable costs deducted fom the intial gain figure)

Plus there will be interest added onto this, and possible penalties as HRC have discovered the non declaration of the sale.



Customer: replied 4 years ago.

Thank you for your reply. As the sale price of £325,000 was on 20 June 2008 after I had lived there for 14 months should the gain be calculated on the Market Value of the property when I moved in on 13 April 2007 which would not have been £325,000 but £254,012 according to Land Registry calculation? After 13 April 2007 it was my only property.



Thanks for your response

No its the sale price less the purchase price that's used.

Then you are given exemption for the time you lived there - as if the gain has accrued over the whole period of time.

The value when you moved in has no bearing.


Customer: replied 4 years ago.

Just one last question: Is the Annual Exempt Amount for each year of ownership or just a 'one-off' allowance as you indicate. Thank you.

Hi Michael

Thanks for your response and further questions

Its just a one of, in the year of sale (so no not for each year of ownership)


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