Can't work out CGT

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    Can't work out CGT

    Hello all! This is my first post and I need your help.

    I have been trying to work out the tax on a property gain. Here are my calculations.
    Inherited the house (property B) in 1997 which is opposite the house (property A) I lived in with my wife. From 1997 - 2000 i stayed in property B due to renovation work taking place but did not live there full time, so it was, theoretically empty from 1997 - 2000. in 2000 i moved into property B but still owned half property A with my wife. i did not nominate property B as my main residence as i was unaware i needed to do this. i moved out of property B in 2008, to rent in another county and rented property B to my daughter. plus i still had a half share in Property A. i am now selling both properties but want to work out the likely tax owed on the property B, this is all new to me. I am still married to my wife but not living together.

    inherited 1997 value £50,000 selling now value £535,000
    moved in as of 2000 until 2008, lived in for 96 months and rented for 144 months but owned for 276 months
    property gain £485,000 rental in total over 144 months is £97,200 how do i work out rent relief and private residence relief and what else do i need to calculate? I have been reading this forum and trying to calculate using their calculations but i am stumped. I hope this all makes sense thanks

    #2
    First of all, you only need to nominate a property if you live in more than one property at the same time.
    Someone who works in one place and spends weekends somwhere else would normally want to do that so there's no doubt which is their main residence.

    From the sound of it, you were only living in one place, A, then B, then another county at any one time.

    What I would do is:
    Treat each property separately.

    You take the gain and spread it over the whole period of ownership (daily ideally).
    Don't forget to deduct any sales and significant capital expenditure from the gain.
    Once you have a daily amount of gain, allocate your residence exactly - that (plus 9 months residence relief) is tax free.
    The rest is taxable.

    Property A.
    Who owns this property?
    Are the proportions of ownership equal?

    If the answers are "you and your wife" and "yes".

    It sounds like it's been your wife's main residence throughout, so she has no CGT to pay.
    You will owe CGT for half the gain 2000 to date of disposal.

    Property B
    You will owe CGT for 1997-2000, and from 2008 to date of disposal (less 9 months PRR).
    Ignore the rental income (which I hope you've been declaring already!)

    Personally, I'd use an accountant, because it's a bit of a mind melter if you haven't done it before.
    And, if you do it yourself, you'll spend days trying to explain to your family how you worked it out!

    It is my personal experience that any tax calculation never gives the same answer again.
    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).

    Comment


      #3
      What is your annual income from your job ? are you paying 20% or 40% tax on income ? .

      The capital gains tax is 18% or 28% and capital gains allowance ( tax free ) is £12,500.


      If you lived in property B for 8 years , you should be able to claim 8 years plus 9 months as main residence. ( say 9 years)

      The capital gains during main residence = is £485K x 9/14= £ 189K. The taxable gain = £485 K - £189K = £296K .

      The capital gains tax rate is 18% or 28%. Assuming you pay at 28% Rate , the tax will be £296K x 0.28 = £83K

      Comment


        #4
        Thanks. Split on property A is equal and have paid tax on the rental from 2008. I am retired but have pensions and the rental which works out about £25,000 per year. So for property B the gain is £485,000 less fees and expenditure. 9 months PPR
        i think it will be about £40 - £45,000 and on property A my half would be £250,000 gain.

        Comment


          #5
          I did not see lettings relief mentioned above.

          https://www.property-tax-portal.co.u...-couples.shtml

          Comment


            #6

            Under the new rules, however, investors will need to live in the property themselves when they come to sell it. This change effectively removes letting relief as a deductible for the vast majority of landlords when filing their CGT returns.

            Read more: https://www.which.co.uk/news/2020/04...ds-in-2020-21/ - Which?

            Comment


              #7
              I expected something like that and bailed out of BTL last year.

              Comment


                #8
                So the new workings i have are: inherited house value £50,000 in 1997. Lived in for 11 years plus 18 months at the sale date, rented for 12 years and owned for 23 years. £50,000 value at the time of inheritance plus £4000 fees. Gain £481.000 PPR = £261,413 (£481,000 x 12.5/23
                Letting gain £219,587 letting relief £40,000 (£219,587 - £40,000 =£179,587 Taxable gain at 18%)

                As i am still married to my wife and she is not joint owner of the property in question, can we use joint relief i.e £80,000?

                Thanks

                Comment


                  #9
                  Was this property sold before 5 April 2020 ?

                  The "extra 18 months" allowed after moving away from property is now reduced to 9 months.

                  So your letting gain is £481K x 11/23 = £ 230K.

                  If your current income ( pension plus rental income) is £50K, or over, you will charged 28%.capital gains tax.

                  Comment

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