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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4960
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Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
Yes I am, and I am ready to answer your tax questions on line. Please tell my what you require.
Customer: replied 2 years ago.
This is a question regarding CGT. I bought second property 14 years ago, and it was used by my son for several years, then it was rented out for the last 9yrs. I worked up until 67 and am now thinking of selling. The property has gained a lot of value, and was wondering what level of CGT I would be liable for. As I said it's been rented for the past 9 yrs. I didn't live at the property at any time. My wages were roughly £12000 a year. Would I be liable for the 28% tax or the 18%. And is there any way I can reduce this?
Did you ever occupy this property before or after letting? Once I know this I can advise further.
Customer: replied 2 years ago.
No it has never been occupied by me
You will be liable for CGT on the gain made on disposal. There will be an allowance for the last 18 months when you are deemed to be in occupation even if this is not the case. So some 90% of the gain is subject to the tax.
The gain is the difference between the acquisition and the selling price.
The acquisition price is the purchase price plus purchase costs including stamp duty or its equivalent plus any improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance which can be offset against rental income for income tax purposes. The selling price is net of the costs of sales. The balance, or rather 90% of the gain is exposed to CGT. From this you can deduct your Annual Exempt Amount (AEA), currently 11.1K.
The remaining balance will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. As you are going out of the house rental business you may be entitled to Entrepreneurs' Relief which limits the tax to a flat rate of 10%. You can read all about this relief here:
I do hope that my reply has been of assistance.
bigduckontax and 2 other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thank you very much, I have never heard of this relief, how would I know I was able to claim this? I do have an accountant will he be able to do this for me ?
Yes, your accountant should be able to do this on your behalf. It does not have to be done until the end of the tax year of sale when you do you annual self assessment tax return.
Thank you for your support.
Customer: replied 2 years ago.
One last question, if I may, if I was to sell the first property and move into the second, how long would I have to live there before being able to sell that one?
Customer: replied 2 years ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Customer: replied 2 years ago.
Sorry pressed the call me button by mistake !
I would be delighted to assist with a phone call, but I am responding from a time zone 7 hours ahead of GMT so the charges would be prohibitive. I am on 006625854819 here.
Customer: replied 2 years ago.
I'm sorry it I didn't mean to press the call me button I didn't realise that the message would go through!
I don't know if you saw the last message I sent ?
Sorry, my error, I missed that one. If you live in the property after the letting, most experts generally stipulate at least six months, then you would be entitled to Lettings Relief (LR) to add to your AEA thus reducing the gain. LR is available up to 40K, dependent, of course, on the level of rent received.