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Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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House bought for £25,000 in 1986 is sold for £135,000 12/11/15

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House bought for £25,000 in 1986 is sold for £135,000 12/11/15 with costs of 15500. Prior to sale the house was rented. What is the capital gains bill?
Hi Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer. Did you ever live in this property? If so please advise dates (as you may due tax relief called private residence relief which will reduce the gain) If you had lived here as your main home, why did you leave and did you come back at all if so please provide dates.Did you at any time own any other property? Was this property you lived in?Did you declare all rental income to HMRC (as you might be due additional tax releifs)Was this property just in your sole name What do the costs of £15500 relate to? Thanks Sam
Customer: replied 2 years ago.
Lived in property from 1986 to 2010. The house was rented out after marriage meant I lived in my husbands house. No other property was owned and all rental income was declared to HMRC. The costs of £15500 were incurred to bring the house up to scratch before sale .
Thanks for your response
Unless the £15500 included a complete new bathroom or kitchen or a capital improvement then these are not allowable - can you advise what these costs were for, as general decorating and repairs are not allowable against the capital gain.
Can you also advise your annual income so I can establish what rate the gain will be charged at
Customer: replied 2 years ago.
Costs were for new bathroom and kitchen and capital improvements. Income was: Proceeds of Rent for property £1080 and pension £7073
Customer: replied 2 years ago.
House was only rented April and May 2015
Sorry for the delay - I was caught on the phone.
Then they are indeed allowable and you will have the receipts to back this up should HMRC ask for them.
You can also deduct the estate agent and legal fees (so do deduct these)
So the initial gain will be sale price £135000 less purchase price £25000 which = £110,00 and then you would deduct your costs to buy and sell (put this figure in but I have estimated as £5000) and the capital improvements of £15500 which leaves £89500
Then we look at what tax reliefs are due
You lived there from 1986 to 2010 so 24 years and had owned for 30 years (360 months)
so the 24 years (288 months) you lived there and the last 18 months will be exempt
So the gain of £89500 will have private residence relief exemption of 288/360 = £71600 exempt
When this is deducted from the initial gain of £89500 then you are left with £17900
Then you are due private residence relief which is the lesser of
1) the amount of gain on which private residence relief is due - so £71660
2) The amount of gain left over after private residence has been applied which is £17900
3) £40,000
As the lesser is 2) !7900
this wipes out the gain so you will owe nothing
Thanks for the further post which I did not see until I had drafted my reply.
So if the house was only rented out for 2 months
Then this will alter the advise and calculation given but what happened to the house between 2010 and April 2015 ??
Did it stand empty?
Customer: replied 2 years ago.
No it was rented out and the rental income surrendered to hmrc
Hi Thanks for your response If it was rented out from 2010 to sale date - then as advised there will be NIL capital gains to pay Thanks and let me know if you require any further assistance or it would be appreciated if you could rate the level of service I have provided or click accept Thanks Sam
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