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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5148
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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In 2001 My husband and I bought a small property in Scotland

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In 2001 My husband and I bought a small property in Scotland for our daughter and furnished it for her to live in while she was working there. After she moved out in 2003 we let it using an Scottish Factor to manage it. We are now about to sell it in order to buy a similar property nearer our home which we hope to live in in our old age.
I have always dealt with all matters concerning the property, the net rental income was paid into my bank account and I paid all charges, insurance, maintenance, repairs etc.. and declared the net income on my annual tax return. We have recently spent a great deal of money on a new damp course and improved drains.
There will obviously be a profit on the 2001 purchase price because of a rise in property values, but we ware worried that capital gains tax may not leave us enough money to buy the new property. How will it be calculated, when will it have to be paid, and does the fact that it is in Scotland and we are in England make any difference?

Hello and welcome to the site. Thank you for your question.

As this property has not been your main residence, all gain from sale of it (sale price less your original purchase price) would be chargeable to capital gains tax. You would be able to offset against this gain
- costs associated with buying the property (stamp duty, legal fees etc)
- costs of selling the property (agent's fees, legal fees etc)
- costs of improving the property (capital cost e.g damp course, new drainage, new kitchen, new bathroom etc .. but not costs covering general repairs)

Once you have taken off the aforementioned costs, you are left with chargeable gain.
As the property is jointly owned, each owner would claim gains allowance against the chargable gain (£11,100 allowance for next tax year) and the balance would be chargeable to CGT at 18%, 28% or a combination of both depending on your total income in the year of sale.

As an example... say the gain after taking into account all costs/expenses is £50,000.

Deduct 2 lots of gains allowance (2 x 11,100)= £22,200

Leaving you with net chargeable gain (50,000-22,200) = £27,800

Gain per owner (27,800/2) = £13,900.

If you were to add this gain to your other income and the total remains below £42,385 before your personal allowance then the gain would attract tax at 18% i.e. £2,502 per owner

You would declare this gain in your tax return and the tax is payable on 31 Jan following the 5 Apr after the date of the sale of property..i.e if you sell the property in May 2015, the gain has taken place in tax year 2015-16 (6 Apr 2015 to 5 Apr2016). You will report this in your tax return for 2015-16 to be issued to you in Apr 2016 and tax would be payable by 31 Jan 2017.

It makes no difference that the property is in Scotland and you are in England..

I hope this is helpful and answers your question.

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