Capital Gains tax

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    Capital Gains tax

    Please help me as I am struggling. I bought my property 4/5 years ago for £357k I have slogged hard to make it nice and now the value is £600k.
    I have had to find a new job as my current role has come to a end, The new role means I have to rent out my current property and rent a new property which I did not see an issue, I then google and alarms are ringing hard. I need to pay 40% on the profit from the rental which is criminal in itself, I hope to sell mine in roughly 18 months and will not be going back there if possible as we will do the full move when I save the stamp duty, I am now panicking badly that I will have to pay CGT on the 250k I have made at the 28% I am seeing, if this is the case I will be finished as I wont be able to take the job and I will out of work, why is this Government hitting me so hard. This has had me and my partner in bits all weekend and I am beyond stressed out.
    I have had a valuation on my property so its clear to see the profit will not be for the time I rent. The government website is completely contradictory and I have no idea what to do.
    Somebody please help me.Thanks

    #2
    Why not sell the property of instead of renting? There is no CGT on your residential property so sell and you will be a cash buyer when you come to buy next time.

    Comment


      #3
      Private residence relief means you'll only pay tax on the percentage of the gain that you didn't occupy the property.

      IE 5 years of 6.5 (by the time you sell) is tax free,

      See example on https://www.gov.uk/tax-sell-home

      But sell now, no point renting a remodelled house for 18 months, as a first time landlord, while living away no less. Doesn't make sense, especially with the market riding high.

      Comment


        #4
        If your current job has just ended , your annual income with rental income will fall below £50K. After deducting the personal allowance of £12,500, Your remaining taxable income will be taxed at 20%.

        Comment


          #5
          Hi Lesney , Thanks for the link, this is the crucial part, going back to my original post.
          when I follow the PRR qualification its not exactly clear.
          1. I fall into the working away bracket and working in the uk for up to 4 years so this says I need to select that I HAVE NOT LIVED AWAY.

          2. This is cruncher (Have I let out any part of my home) yes I have let out 100% but then under letting part of you home it asked what percentage have you lived in, (I LIVED IN ALL OF IT )

          I read this as question is N/A to me and question 3 allows full PRR based on i need to move because of my job.

          This really is not clear.

          I will see the house at some point but I need to secure my new job first before I go down this road, as well as I dont have time to sell this and buy before my start date.

          Any advise is welcome.

          Comment


            #6
            You only pay CGT for the period that the property is being let, not while you live/lived there.
            So if you bought it 4 years ago and sell in 18 months, you'll pay CGT on 1 year's increase in value (you get an extra 9 months relief) and pay no CGT on 4 1/2 years increase.
            So you'd pay tax on about £45k, which would be just under ten thousand pounds.

            Obviously if house prices increase over the next 18 months the figures will all be higher.
            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


              #7
              How can I pay them 10k plus. I have to pay the 40% of the rental value over the 18months which is a further 12k I am working away for the MOD and being hit with 22k in tax , I cant afford to do this and will be out of a job , the part that is not clear is if you do the PRR calculation is question 4 Have you let any part out of property out , the answer would be yes but I have not let a part out , i have the whole thing out, it makes no sense as question 3 then says I will be classed as living fully, it contradicts itself, as it can be read several ways. totally not clear. I need somebody legal to answer this .

              Comment


                #8
                You don't pay CGT until you sell the property, at which time you have the other 72% of the gain to enjoy.
                Same with the income from the rental, you get the other 60% - and the rest of your income, which must be OK if you're a higher rate tax payer.

                I'd pay an accountant for some proper advice (you need tax help, not legal help).
                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

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