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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15975
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am planning to sell my a property in 2016 for £250 000,

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Hi - I am planning to sell my a property in 2016 for £250 000, and am wondering, because my day to day income will be less after selling, if it will make a difference to capital gains tax which tax year I sell it in? I am on a low income, and on my self assessment form generally end up paying around £500 each tax year. But when I move I won't have rent or mortgage to pay, so don't need to earn so much. After April 2016 I would go below the 10600 taxable income allowance.

Is the property you are planning to sell your main home? If it is and it has been your only or main home since you bought it, then you won't have to pay Capital Gains Tax on any gain you make as it will be covered by the principle private residence exemption which you can read about here.

The amount of CGT payable is affected by the level of an individual's other income as you thought. There are two rates of CGT, 18% and 28%. The rate or combination of rates that an individual will pay will be dependent on the level of their income and the net taxable gain in the tax year that the property or other asset is disposed of. The first £11,000 of gains made in 2015/16 will be tax free. If a again occurs in 2015/16, one of the following scenarios will apply:

1 If the sum of other income and the net taxable gain is £42,385 or less in 2015/16, then all the taxable gain will be charged to CGT at 18%.

2 If other income alone is £42,385 or more in 2015/16, then all the taxable gain will be charged to CGT at 28%.

3 If other income alone is less than £42,385 in 2015/16 but greater than £42,385 when the net taxable gain is added, then part of the net taxable gain will be charged to CGT at 18% and part at 28%.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Thank you that is very helpful and I intend to rate you excellent. Just to make sure I have understood: for any tax year the day to day income plus any lump sum capital gain will be lumped together in terms of working out how much will be charged at lower or higher rate. They are not treated as separate with two separate tax free allowances? (ie there is only one tax free allowance for the total sum, and therefore whether or not I earn day to day amount less than 10600 makes no difference for the year i make the capital gain, except that whatever I earn keeps topping up the total sum). p.s I only lived in the property for a short time and think I've managed to work out lettings relief and private residence relief

The gain and the income are added together. However, the first £10,600 of your income in 2015/16 will be tax free and the first £11,100 of any gains you make in 2015/16 will also be tax free. It is only the net taxable gain that is added to your income.
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