Capital gains tax and tax credits

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    Capital gains tax and tax credits

    update - ive been onto the tax credits for the past hour and they are saying not to inclue unless im re-investing or making money from the capital gains


      It sounds as if you don't understand CGT. It has nothing at all to do with your rental income or loss and cannot be offset by that (or your lack of general income). PPR has to do with when you lived there, not when it was empty. Some actual numbers would be useful. When did you live there (exact dates), when did you buy it, for how much and when did you sell it and for how much. Declaring or not declaring also has nothing to do with whether you feel you owe tax.



        The capital value of any property held by a claimant is ignored but the rental income/profit is taken into account, unless exempt from income tax or excluded from profits under the rent-a-room scheme (section 791 ff of ITTOIA 2005). So no, you do not need to declare it for tax credit purposes. However you may need to declare it for tax purposes if there is a gain.


          I forgot to add that there is no capital limit for tax credit purposes, which is why you do not need to declare the capital for tax credit purposes!


            Thanks jon i think i understand this - just - ive about 2 yrs when the property was occupied my myself and children and purchase price was 34,000 , sold for 70,000 still under a mortgage which we ignore i guess plus had new windows and boiler in and of course solicitors and estage agents fees , its given me about 2,000-3,0000 to pay to tax man


              For any owner occupied property ( and never rented out ) , there is no tax to pay on the capital gain.


                Letting relief is a tax allowance that's currently available for a landlord who has let a property that they used to live in.
                It is the lowest of:
                The PPR or
                £40,000 or
                the whole gain.

                So, in your case, it's likely to be the value of the PPR, which can be deducted from the taxable gain in the same way.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


                  Here is my rough calculation of your situation :

                  Your sales proceeds = £70K - solicitor fees - estate agent sales fee = £68,000 ( approx )

                  Your acquisition cost = £34K + £6 K ( windows ) + £3K ( central heating ) + conveyancing solicitor = £44,000

                  So your capital gain = £68K - £44K = £24K.

                  Your ppr is about 2 years + 18 months after moving out = 3.5 Years. Your exemption for ppr = £24K x 3.5 /17 years = £4.95K .

                  Your letting relief = ppr = £4.94 K .

                  So your ppr + lettings relief = £10K ( approx) .

                  Taxable capital gain = £24K - £10K = £14K.

                  Your 2018-2019 capital gains allowance = £11,700

                  Your taxable gain = £14k - £11,700 = £ 2,300.

                  Your capital gains tax is 18% on £2, 300 = £414.


                    Thank-you Gordon that really helpful - much appreciated


                      Reinvesting has no bearing at all on the CGT calculation.

                      You can only claim for a boiler if there was no boiler before AND the one you fitted is still there at the time of sale
                      Laminate -- not really unless there was no floor before at all
                      If the greenhouse was destroyed you cannot claim for it

                      The amount you paid for it is the relevant value -- not how much it was valued at

                      Very roughly you will have a 50K gain which will be moderated down by about a third due to your prior residence and related reliefs, so maybe a taxable gain of 23K after exemptions.

                      Wonderful the way tax was given away to folk via these council tax sales.....


                        done an on line calculation and its coming with a taxable gain in this region
                        Your tax rate

                        These rates are based on your Income Tax bands:

                        £20,030 taxable gain multiplied by 18% tax rate

                        so is this what i will have to pay to them ? its just i re mortgaged the house so had to pay off the mortgage so there wasnt a lot


                          The capital gains calculation is reported on Tax Return SA108 ( 2019) which you can download with the SA108 - Notes ( 2019) .

                          Mortgage borrowings and repayments are not included in capital gain calculations.

                          Here is my calculation for your situation :

                          Property owned 17 years total period , lived in 2 years and rented for 15 years. Claim residence period = 2 years + 18 months =4 years say

                          Sale proceeds = £70K

                          Original buy cost = £20K

                          Allowed Expenses = conveyancing costs (£1K , buy and sell) + estate agent charges ( £1K) + improvements ( £3k) = £ 5K ( approx )

                          Capital Gain = £70K - £20K ( buy cost ) - £5K ( expenses ) = £45K (approx)

                          Less main residence exemption = £45 x 4/17 = £ 11K

                          Less lettings relief claimable = £11K

                          Taxable capital gain = £45K - £11K - £11K = £23K .

                          Capital Gains Allowance = £12K

                          Taxable Gain = £23K- £12K = £11K charged at 18% = £2K. tax bill .


                            Isn't the capitol gain added to income then tax is paid at 18% or 28% depending on that years total income?


                              thanks all yes thats right im on 18 percent as im a low earner - dont usually pay at at all really they usually pay me back

                              im a little confused with lettings relief at 11K , the HMRC website calculator is so confusing how is this calculated - ? any help appreciated


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