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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My wife and I own a family holiday home, if I sell for

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My wife and I own a family holiday home, if I sell for £300000, having bought for £50000 25 years ago, and buy for £300000 somewhere else based on my understanding we would be liable for £78000 capital gains tax and £24000 stamp duty, making £102000 tax. This seems grossly unfair, am I right?

The gain would be £250,000 (£300,000 - £50,000). The first £11,100 would be tax free leaving a net taxable gain of £238,900. If there are joint owners, then the gain is divided between them and each part owner has a tax free amount of £11,100.

There are two rates of CGT, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year you sell the holiday home. The most that can be taxed at 18% is £32,000 and that is reduced by £1 for every £1 of income you have over £11,000 in 2016/17.

Using the calculator here, I have computed the stamp duty at £14,000.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.
Ok, but how can I reduce the tax payable, the first house is leasehold and part of a large Victorian house, whenever there are structural renewals required such as the roof we all share those costs, are these valid deductibles?

I'm afraid that there is little that you can do other than to have your spouse as a joint owner and to sell in a tax year when your incomes are low so that more of the net taxable gain is charged to CGT at 18%. Repair and maintenance costs are not deductible from a capital gain but improvement costs are.

Customer: replied 1 year ago.
improved roof design replacement with longer life guarantee would count as deductable?

If it enhances the property value, then you could claim your share of the cost.

Customer: replied 1 year ago.
But painting and decorating could enhance value, but I understand that doesn't count?

Painting and decorating are general maintenance. Look here for more information.

TonyTax and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
If I had a mortgage on the property would that be deductible from the proceeds of sale before the Cap Gains Tax calc?

I'm afraid not. If you bought the house with a mortgage, then it is simply part of how you funded the purchase.

Customer: replied 1 year ago.
if we died and our estate fell below the inheritance tax threshold would the beneficiaries be liable for capital gains tax on the second home please?

If you inherit a property on the death of another individual, its cost for CGT purposes is the value at the time of death, ie the probate value. So, if the person who inherited the property sold it soon after they inherited it, it would be unlikely to give rise to a significant gain.

Customer: replied 1 year ago.
if we gave the second home as a gift to our children and outlived them by 7 years, would we incur CGT at the time of giving?

If you make a gift of an asset such as a property to your children, there may be CGT and IHT implications.

There will be a CGT liability in the tax year during which the gift is made if the value of the property when you give it away to a connected person is more than the price you paid for it. If you live for at least seven years after making the gift, it will escape IHT. If you don't live for at least sevn years after making the gift, the value of that gift will form part of your estate for IHT purposes even though you no longer own the property.