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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 5241
Experience:  FCCA FCMA CGMA ACIS
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Am trying to work out the CGT I am going to have to pay on

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Hi there. Am trying to work out the CGT I am going to have to pay on selling my house
Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: we bought house in April 2007 and lived in it for 41 months to Sept 2010. Then rented it out until now with sale going through in May this year I would think
Assistant: Is there anything else important you think the Accountant should know?
Customer: I understand I can claim last 18 months and first 41 months and also get up to £40k for the 74 months we were renting it I also understand I should be able to claim the initial legal costs including stamp duty, current legal costs for sale and the £40k we spent on renovations but not 100% clear on this?
Customer: replied 4 months ago.
The gain is £475,000

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

The gain is the difference between the acquisition and sale values. Th former is the price paid plus purchase costs plus improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance. The selling price is net after deducting selling costs including advertising. Your 475K figure may need adjustment.

As to Capital Gains Tax (CGT) the following would be the computation. Your total ownership time is say 145 months. Your total occupation time is 59 months. Thus 86 / 145 = say 60% of any gain will be subject to CGT at 18% or 28% depending on your income including the gain in the 18/19 tax year. 285K of this will be exposed to the tax less your non cumulative Annual Exempt Amount (AEA) of 11.7K and Lettings Relief (LR) up to 40K leaving 233.3K taxable. Worst case scenario is a tax bill of say a tad over 65K, but it might be less (see above).

I do hope that you have found my reply of assistance.

Customer: replied 4 months ago.
Thank you. So if the initial purchase costs were £20k, we spent £40k on major renovations and the sale costs are going to be about £15k then the actual gain to be taxed on is £400k?

475K - 20K - 40K -15K = 400K adjusting the worst case tax to say 53K, better than a poke in the eye with a sharp stick!

Please be so kind as to rate me before you leave the Just Answer site.

Customer: replied 4 months ago.
Thanks can I just check why you are using 145 as total months of ownership as I make it 132?

I was taking it up to May. If I have made an error the correction eas easy enough, just a bit of juggling needed!

Customer: replied 4 months ago.
was I which I make 11 years x 12 months?

Leave it to me to have another look, back after I have made my delayed morning coffee!

bigduckontax and other Tax Specialists are ready to help you

From long experience you will find it easier to ring me. I am on 01750 725420.

All sorted out in the phone call, I think.

Thank you for your support.

Customer: replied 4 months ago.
Apologies. Final question I promise. Can both of us claim up to £40k letting relief in our separate returns?

The gain would be halved 50/50 for tax purposes and both of you have an AEA and LR.

Customer: replied 3 months ago.
Apologies but one thing I forgot to mention is we have got a letter from the revenue noting our claim under ESC D21 for the property to be treated as our main residence. Does this make any difference?

Which property?

Customer: replied 3 months ago.
the one we are selling. We have been renting elsewhere not owning.

Then the HMRC cat appears to have jumped the right way!

Customer: replied 3 months ago.
what does that mean?

It means thet the correct residence has been selected for entitlement to PRR.