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bigduckontax, Accountant
Category: Tax
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I bought a property purposes in Jun 2006

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Hi. I bought a property for investment purposes in Jun 2006 for £197,000. I have now sold it this Nov 2015 for £265,000. I am trying to calculate the CGT to be paid to IR. The total cost of selling the property including solicitors fee comes to £5,582. I understand I can also deduct the cost of acquisition which I make out to be roughly £6,200 and also the allowance for 2015-16 is £11,100.
Is there anything else I need to be taking into account which can reduce my CGT?
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly the IR ceased to exist some years ago on amalgamation with HM Customs and Excise to form HMRC. The gain upon which CGT will be levied is the difference between the net selling price and the acquisition price. The latter is 6.2K plus any costs including Stamp Duty Land Tax plus any improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance which would be allowable against any rental income. The selling price is the net selling price [265K - 5.582K = say 260K]. Take off the purchase price leaves some 63K. Now deduct the Annual Exempt Amount (AEA) of 11.1K leaves a tad over 51K liable to CGT. This is levied at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale; worst case scenario is a bill of some 14.4K. If you ever occupied the house you could be entitled to Lettings Relief (LR) up to 40K also, but it would appear from the tenor of your question that this was not the case. This final taxable figure can be offset by any brought forward capital losses from previous years and against any capital losses made in the year of sale. I do hope that I have been able to shed some light on your CGT position.
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Thank you for your support.
I should have mentioned that for the last 18 months of ownership you are deemed to have been in residence even if this is not the case. Thus only 95 / 113 is liable which reduces your worst case exposure to say 12K.
Customer: replied 2 years ago.
Thank you for your follow up response. It is good to know I can save a further £2k with the deemed residence of 18 months. I have now taken this into account. I have a query though. You didn't seem to take the requisition cost of £6.2K into account in your calculation. Can you please advise?Thank you
Requisition costs; requisition of property was a war time emergency measure like the 1d postage stamp on my birth certificate? Please confirm your follow up.
Customer: replied 2 years ago.
What I mean by requisition costs are the costs I incurred in purchasing the property. eg Stamp duty, solicitors fee, mortgage fees, installation of central heating etc This cost comes to the £6.2k I mentioned.
Acquisition costs is, I think, to which you refer! You acquired for 197K + 6.2K = 203.2K You sold for 265K - 5.582K = say 259.4K. Gain is thus 56.2K. Adjust by 84% for the last 18 months leaves some 47K exposed to CGT. Knock off 11.1 K leaves 36.1K, worst case scenario at 28%, leaves a tad over 10K CGT due.
Customer: replied 2 years ago.
Thank you Keith. That is more in line with what I had calculated.You have been extremely helpful and I am very grateful.
Sorry for the earlier error, at least we have got to the bottom of it now!