CGT calculation

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    CGT calculation

    Hi all,

    This will probably be a bit incoherent so apologies in advance.

    A friend of mine has asked me to work out her CGT liability for a flat she is selling. The bare facts are these:

    She bought the flat in May 2000 at a purchase price of £78,000. The completion statement indicates £79,800 was paid including stamp duty, solicitor's fees, searches etc.
    She lived there til August 2004 and since then has rented it out continually from August 2004 til June 2021.
    The flat is currently under offer at £242,000 and estate agent & solicitor's fees should be around £4,000. She expects the sale to complete by the end of October.

    From this data I calculate that Capital Gain will be £238,000 - 79800 = £158,200 x 0.8 (I get the 0.8 figure by dividing the length of time the flat was let by length of ownership.) = £126,560.

    The lady in question does not expect to get much other income this financial year. Perhaps a maximum of £5,000 only.

    Therefore I calculate the tax payable as:

    £12,300 free of tax (Capital gains allowance)

    £7,570 free of tax (residual personal allowance)

    £37,701 taxed at 18% = £6,786

    £68,989 taxed at 28% = £19,317.

    So total CGT would be £26,102.

    I am sure I will have made some errors here, so I (and she) would welcome any comments which may clarify the situation.

    Thanks all,
    Chris.




    #2
    Sounds about right. There is no longer letting relief as such but I think you can still add 9months to the time. Also if there were any capital expenses (not during the period of owner occupancy)

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      #3
      She simply needs to declare and pay ( ! Pay! ) within 30 days of sale. HMRC system will calculate, based on then current rules (think taxes may go up for Covid & brexsh*t).
      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

      Comment


        #4
        Here is my rough calculation of the tax bill :

        Total period of ownership = 245 months

        Main residence period = 4 years 3 months plus 9 months after moving out 60 months .

        Period under letting = 185 months and Capital gain= £158,200 x 185/245= £119,457 .

        Taxable Capital Gain = £119,457 - £12,300 ( CG allowance ) = £107,157 .

        Seller's annual income = £5000 ( approx) ,

        so £45,000 is chargeable at 18% = £8,100 plus £62,157 at 28% = £ 17.403

        Total tax bill = £25,503.

        Comment


          #5
          Thanks all. It seems I had a couple of errors there, thanks for pointing them out.

          There is more to this though. Please see my next thread titled 'Let Property Campaign'.

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