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bigduckontax, Accountant
Category: Tax
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I am a British Citizen, non-resident UK taxpayer, living in

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I am a British Citizen, non-resident UK taxpayer, living in South Africa. My wife is the same status. I bought a house in Sulivan Road in Fulham for £605,000 in December 2005 which I lived in with my wife and children until November 2011 when we moved to South Africa. I was resident here until we left . We have been letting out the house until now. I have been told its worth £1,450,000 and we are tempted to sell it to buy two smaller flats which will be easier to rent out. I need to know what the capital gains implications are for my situation. We own a house and live in that in South Africa so Sulivan Road is no longer our primary residence. I do declare income monthly in the UK for rental income and a small salary as a company director.
Customer: replied 5 months ago.
My Questions would be 1. If we sell that house , how much Capital Gains tax would we have to pay ? 2. If we bought two more flats, both shared or one in each of our names , would there be any tax relief in terms of the Capital Gains tax . ? 3. Are there any other ways around that Capital Gains tax ?

Hello, I am one of the experts on Just Answer and pleased to be able to help you with your question.

You will be entitled to Private Residence Relief (PRR) for the period you lived there and for the last 18 months of ownership when you are deemed to be in residence even if this is not the case. Assuming that you sold now your Capital Gains Tax (CGT) liability could be calculated as follows. Total ownership time is say 147 months. Occupation time is 89 months. 147 - 89 = 58 so 58 / 147 = say 40% of the gain would be exposed to CGT at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale.

Your gain is 845K so at 40% 338K would be exposed to CGT. However, you have a non-cumulative Annual Exempt Amount of 11.3K and Lettings Relief (LR) of 40K to deduct leaving 286.K of gain with a worst case scenario of a tax bill of a tad over 80K.

What you do with the money is irrelevant in terms of the current CGT bill. When you sold again at some future indeterminate date CGT would apply again. CGT is s thoroughly nasty little tax likely to rear its head unexpectedly. I had one customer who bought his son a house to attend Uni. The son stayed in it for years after and when it was eventually sold the father was landed with a 37K CGT bill for a dwelling he never enjoyed.

I am so sorry to have to rain on your parade.

Customer: replied 5 months ago.
Hi Thanks for the email.That is a very thorough response and as you say, quite upsetting. How would we work out what tax threshold we are in between the 18-28 . Would you be able to give a more definite answer if I tell you what we actually earned since we left ... In other words, what are the best and worst case scenarios? Would we be able to deduct any work we have done on the property over the years too which might amount to around £20-30,000 here are the figures below ... April 2017 Brett £17,378.95 Sue £9,218.95 April 2016 Brett £11,918.96 Sue £3,962.96 April 2015 Brett £7,316.53 Sue -£617.68 April 2014 Brett £15,927.17
Sue £9,538.90 April 2013 Brett£19,685.28
Sue £12,754.36
April 2012 Brett £11,262.58 Sue £4,106.43

The gain is calculated from the difference between the net selling price ie after deducting selling costs including advertising and the acquisition price which is the purchase price plus purchase costs plus improvements eg installation of double glazing, central heating, but not routine maintenance which would be allowed against rental income.

Now suddenly you are saying 'we' when originally you indicated that you were the sole owner. If that is not the case then the whole ball game changes. Unless the expenditure was improvements then it has no effect on the computation of the gain.

Customer: replied 5 months ago.
I am sorry I was not completely clear but I am nto the sole owner .... Myself and my wife own the house jointly and have the identical status of being Non Resident British Citizen Taxpayers. The amounts are only improvements and not wear and Tear , for example upgrading the showers and toilets and replacing front doors etc . Can you tell me what my situation is based on that information ? Thanks again. Best Regards Brett

Your gain is 422.5K each at 40% would be 169K. Now deduct AEA of 11.3 and LR of 40K leaves 117.7K taxable. I cannot calculate the tax more exactly without details of individual income in the sale year.

The expenditure on improvements like double glazing, central heating installation, extensions etc can reduce the amount taxable. I need a more accurate indication of this to determine liability.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 5 months ago.
Thanks for your great answers but as a final question if we sold the house in this financial year and I had other taxable income in the UK of £19,000 and my wife of £12,000 what would be the actual amount each payable in CGT ( please give an estimation if it’s not enough info) you said £80,000 worst case scenario for me alone so would it be more or less for shared house ownership . You can exclude all refurbishments in your estimation . Thanks v much !!! Best regards Brett

For you take 117.7K - 13.5K = 104.4K which at 28% would be say 30K then ad 13.5 @ 18% = say 2.5K so total tax bill a tad under 32K.

For wife 117.7 - 20.5K = 97.2K which at 28% would be say 27K then add 20.5K @ 18% = say 3.7K so total tax bill of some 24K.

Thank you for your support.