CGT - how much?

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    CGT - how much?

    As an example, and using "round figures" for simplicity:~

    If I were to sell a rented property which I have NEVER lived in, assuming I sell it for £100,000 more than I paid for it, after exactly 10 years ownership, how much CGT would I pay:~

    a) if I were NOT a tax payer?

    b) if I were a lower rate tax payer?

    c) if I was a basic rate tax payer?

    Thanks in advance.

    #2
    Cgt

    a = 100000 less taper relief 40000 less CGT yoannual exemption 8800 taxable 51200 less personal allowance 5035, tax at 10% on 2150 = 215, tax at 20% 30309 = 6061.80, tax at 40% 13706 = 5,482.40 total tax £11,759.20 . I could only calculate the tax on b and c if you told me exactly how much you earned.

    Comment


      #3
      Please ignore

      Please ignore above calculation as your property would have been bought before 5 April 1998 so Indexation allowance would apply from period purchased to 5 April 1998 this is calculated on purchase price which you haven't given so I can't do calculation. Also only 9 years taper relief will be available (40% for ten years 35% for 9 years). If you want me to do calculation please let me know purchase price and date of purchase.

      Comment


        #4
        Just to add to the above reply:

        (1) Sandy, income tax personal allowance is not deductible in the calculation of CGT payable. Remember, you already have the CGT equivalent of personal allowance of £8,800. Also the basic rate band is £30,310 and not £30,309. Please do not regard this as any criticism of your reply, as none is intended, but just to improve your knowledge. A good reply by you in the main.

        (2) Properties owned before 17 March 1998 will be eligible for maximum non-business asset taper relief if sold on or after 6th April 2007.

        (3) letting of commercial properties which are used for owner's or tenant's business qualify for business asset taper relief. Business could be a sole trade, a partnership or a limited company. This is 50% after only 1 year and 75% after only 2 years.

        However, commercial investments owned since before April 2004 may be regarded as ''tainted'' for taper relief purposes, ie the period of ownership prior to April 2004 in the final 10 years ownership may qualify for only non-business asset taper relief, meaning part of the gains will qualify for non-business asset taper relief and part as business asset taper relief.

        (4) The most important point to bear in mind is that all taxable capital gains is added to all other taxable income of any tax year and taxed as top slice of the total income and gains. In most cases, this will mean that some of the gains is taxed at basic rate (for CGT this is 20%) and the rest at higher rate of 40%.

        Ramnik
        Private advice is available for a fee by sending a private message.

        Comment


          #5
          thanks?

          It would be for a FUTURE sale, as it is a very recently acquired property.

          I'm not currently working, and haven't done since 1994, but I posed the 3-stage question to see if there would be any additional CGT if I were to return to work (or if my rental income increased).

          At the moment, I am renting out a flat (since 1994 actually) at £420 per month (with a mortgage of £53), and a recently acquired house at £650 per month (with a mortgage of £323).

          By my own calculations (including 10% W&T), my nett income for tax purposes is 12 x (420-53) PLUS 12 x (650-323) LESS 10% of (12 x 420+650)

          = £7,044

          After deducting my personal allowance of £5,035 (if I'm right in assuming that is permitted?) then the nett TAXABLE income is £2,009. I assume this places me on the LOWER rate?

          The flat I am keeping indefinately, but the house will be sold one day; I'm not sure when, but I am using 10 years and £100K increase to make it easier for me to follow the CGT calculations you guys might illustrate.

          As it happens, my Sister-in-law has also recently bought a house to rent out, but she also works full time and pays BASIC rate tax. She will also sell her house in a number of years time.

          Any follow up would be appreciated.

          Thanks.

          p.s. most recent property was purchased 3 months ago for £105K

          Comment


            #6
            Originally posted by lochaber_lass View Post
            It would be for a FUTURE sale, as it is a very recently acquired property.

            I'm not currently working, and haven't done since 1994, but I posed the 3-stage question to see if there would be any additional CGT if I were to return to work (or if my rental income increased).

            At the moment, I am renting out a flat (since 1994 actually) at £420 per month (with a mortgage of £53), and a recently acquired house at £650 per month (with a mortgage of £323).

            By my own calculations (including 10% W&T), my nett income for tax purposes is 12 x (420-53) PLUS 12 x (650-323) LESS 10% of (12 x 420+650)

            = £7,044

            After deducting my personal allowance of £5,035 (if I'm right in assuming that is permitted?) then the nett TAXABLE income is £2,009. I assume this places me on the LOWER rate?

            The flat I am keeping indefinately, but the house will be sold one day; I'm not sure when, but I am using 10 years and £100K increase to make it easier for me to follow the CGT calculations you guys might illustrate.

            As it happens, my Sister-in-law has also recently bought a house to rent out, but she also works full time and pays BASIC rate tax. She will also sell her house in a number of years time.

            Any follow up would be appreciated.

            Thanks.

            p.s. most recent property was purchased 3 months ago for £105K
            There is no point in going into details about sale of property which may or may not happen in the future.

            The only point I will add is that you will have lot more expenses than you are mentioning above. For example, electricity and gas certificates, buildings insurance, repairs and maintenance etc.

            Ramnik
            Private advice is available for a fee by sending a private message.

            Comment


              #7
              Tax Accountant

              Hi Ramnik

              I stand corrected about not getting the personal allowance for CGT. Did you know Income Tax was only introduced into this country in 1874, my opinion is that the CGT calculation is ridiculously complicated as is taxation in general and I can't see it getting any better in the future.

              Sandi

              Comment


                #8
                Originally posted by Sandi View Post
                Hi Ramnik

                I stand corrected about not getting the personal allowance for CGT. Did you know Income Tax was only introduced into this country in 1874, my opinion is that the CGT calculation is ridiculously complicated as is taxation in general and I can't see it getting any better in the future.

                Sandi
                Hi Sandi,

                One can always hope.

                Ramnik
                Private advice is available for a fee by sending a private message.

                Comment


                  #9
                  Originally posted by Sandi View Post
                  Hi Ramnik

                  I stand corrected about not getting the personal allowance for CGT. Did you know Income Tax was only introduced into this country in 1874, my opinion is that the CGT calculation is ridiculously complicated as is taxation in general and I can't see it getting any better in the future.

                  Sandi
                  No- it was in the 1700s, and it was temporary as well- to fuel Napoleonic wars- so never intended to be permanent, hence annual Finance Act is required in order to authorise it.

                  NEW TAX FORM (3 questions only):
                  1. How much do you earn?
                  2. How much have you still got?
                  3. SEND IT ALL TO TAXMAN.
                  JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                  1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                  2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                  3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                  4. *- Contact info: click on my name (blue-highlight link).

                  Comment


                    #10
                    Jeffrey

                    http://www.hmrc.gov.uk/history/

                    Please see link Income Tax was repealed the year after Waterloo.

                    Comment


                      #11
                      Speccy

                      My ZX spectrum used to have a error message 2variablenotfound which meant to many variables answer not found, I think this is a good answer for anybody wanting a calculation of tax on a property not yet sold.

                      Comment


                        #12
                        Originally posted by Sandi View Post
                        http://www.hmrc.gov.uk/history/

                        Please see link Income Tax was repealed the year after Waterloo.
                        Income tax is very like Waterloo:

                        I have met my destiny in quite a similar way.
                        The history book on the shelf
                        It's always repeating itself.

                        Couldn't escape if I wanted to.
                        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                        4. *- Contact info: click on my name (blue-highlight link).

                        Comment


                          #13
                          The whole reason I asked is to work out whether it is going to be worth my while buying more property as opposed to doing something else with my money.

                          Given that bank accounts, stocks/shares, ISA's, poker, horse racing, drug dealing etc, all have an element of risk with no "guarantee" of what return you will get, I just wanted an idea of what I would have to give Gordon Brown on the sale of the property in question, and any others in future. It may (or may not) be worth my while buying more properties; the dilema is, I don't know as I'm not a tax expert. Sure I can work out how much rent I would get, and have a stab at the tax liability for that, but CGT is beyond me.

                          If there was some website/software that I could use to input "simulated" dates/prices then I would do so myself, but I have not found any.

                          I just thought there might be someone on here who could give me "approximate" figures for the scenario I posed?

                          If ANYONE can then I would appreciate it.

                          If not, then thanks to those that responded thus far.

                          Comment


                            #14
                            Ready reckoner

                            I reckon my initial estimate plus £2,014 which would be about £14k will be in the ball park. If you drop me a e-mail at sandibri@yahoo.co.uk letting me know when you purchased the property I will make you up a spreadsheet to use as a ready reckoner.

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