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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5112
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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What is my liability gains tax on the profit from

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What is my liability for Capital gains tax on the profit from the sale of a flat that I jointly own with my daughter, who lives in it? The profit will be circa £48k, reduced by fees to £45k between us?
Hello and welcome to the site. Thank you for your question.

Please confirm this is a second home/investment as far as your financial affairs are concerned.

I am basing my calculations on the assumption this is your second home and also that the sale takes place in tax year 2014-15.

Your share of profit after costs = £22,500
Gains allowance = £11,000
Gain chargeable to CGT (22,500-11,000) = £11,500.

This chargeable gain would be added to your total income to see if it is within basic rate band i.e £41,865.

If so, then your CGT would be (11,500 x 18%) = £2,070.

In the event your total income is in excess of £41,865 including the chargeable gain, the excess would be charged at 28%
as an example

Total income after personal allowance and before gain = 25,000
CGT calculation
CGT at 18% on (31,865-25,000) = 6,865 x 18% = £1,235.70
CGT at 28% on (11,500-6,865) = 4,635 x 28% = £1,297.80
Total CGT (1,235.70+1,297.80) = £2,533.50

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Thanks, ***** ***** offset costs for refurbishment against my gain as I paid them in full, amounting to circa £7000 in the last year (new bathroom and kitchen), £2000 new boiler in 2012, and £4500 new windows in 2007?

Andrew, thank you for your prompt reply.

Expenditure of a capital nature as outlined by you would be an allowable expense and will reduce overall gain and thus your share of it. You could not just offset it against your gain because the spend was to enhance the value of the property as a whole and not just your share.

I hope this helps.
Customer: replied 3 years ago.

Thanks a lot, I understand the principle better now. One final question, closely related is - assuming our solicitor apportions our payment for the flat equally, this will be circa £37.5k each, the £75k being £30k capital repayment and remainder £45k profit, can my daughter simply give me a portion of her payment as a gift without attracting any tax liabilities? I am thinking of a figure of approximately £30k as a portion of the profit and my capital outlay when we bought the flat jointly. If this isn't possible are there limits as to how much she can give us per year?

Andrew, thank you for your reply.

As she was living in the property as her main residence, her gain would be covered by private residence relief and no CGT payable.

Gifting the money to you..
One can gift away £3,000 pa and it is exempt for IHT purposes. If she has not gifted any money in the past and/or current year she could gift £6,000 to covering the exemption allowed for this year and previous year. She should do that before 5 Apr 2015.

She could do likewise £3,000 in tax year 2015-16 soon after 6 Apr 2015. This takes care of £9,000.

If she were to gift you larger sums than the gift would be regarded as a potentially exempt transfer and seven year rule applies. If she survives for 7 years after making the gift, the amount would be exempt for IHT purposes.

More information on gifts and IHT implication are covered here

I hope this helps.

Customer: replied 3 years ago.

Thanks a lot, is it only inheritance tax that applies to gifts such as this, I don't anticipate it being a problem from my daughter to me! And if a tragedy happens then the last thing we will be worrying about is inheritance tax.

Thanks for all your help

Andy E

Andrew, just IHT tax to worry about..

Gifts in the hands of a recipient are tax free. There is no gift tax as such.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it. and other Tax Specialists are ready to help you
I thank you for accepting my answer.

Best wishes