CGT Letting relief/PRR

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    CGT Letting relief/PRR

    Hi, sorry for posting this question but I'm new to taxation.
    I bought a flat in Jan 1996 for 38k and I'm potentially looking to sell this for 200k before april. I lived in the property until Aug 2005 and since then I have rented the property out. I understand I am due some principal residence relief in addition to letting relief. The flat is in my sole name although I am married and I am a high rate tax payer.

    Can someone please help me to calculate how much my CGT tax bill would be. Is it advisable for me to put the property in joint names as my partner is a basic rate tax payer? My partner has never lived in the property.

    Thanks Clare

    #2
    Although a transfer to a spouse (or Civil Partner) will not incur CGT, there could some loss of PPR relief and Lettings Relief depending on the timing.

    However, it should be possible to calculate the optimum % transfer for the additional Annual Exemption and 18% tax band to outweigh the above.

    Presumably all the rental profit has been returned to HMRC in your sole name?

    Comment


      #3
      Just a tad over £2000 in CGT. However you can deduct the aquisition costs and legal and sales fees off the gross gain which wil;l bring it down a bit.
      A quick calculation reveals that if you gifted your husband around 7.5% of the beneficial ownership of the property you would have no CGT liability even with the slight loss of PPR and LR which you husband is not entitled to as you are.
      Note the exchange of contract signed date will have to be prior to the 6th of April 2014. Regards Peter

      Comment


        #4
        TaxationPete,

        Is that £2k or £20K CGT? If it's as it reads £2k, once you've applied solcitor and estate agent fees - it will be a miracle if you have to pay any CGT. What a lovely profit - well done!

        Comment


          #5
          2K, the costs are deductible form the gross gain not the CGT so it will reduce it but it will not go away. From memory it came to circe £1750. Regards Peter

          Comment


            #6
            OK - I understand - thanks.

            Comment


              #7
              Question to you both.
              I still have an outstanding mortgage of 100k on the property. The BTL roughly makes me around 10k a year. Is there any calculations which will help me make the decision to sell and realise the profit versus the accrued net income assuming I sell at 200k.

              Basically is now a good time to sell whilst the market is buoyant and take the max gain. Which is the better long term. I would reduce 45k interest on my main residence property. I am expecting that rates will increase within two years and a correction or stabilisation on house prices especially in London at some point.

              Comment


                #8
                I think only you can weigh that one up. It could be as broad as it is long. If you are realising a gain of about 100K and you knock 45K off of your own property - you could use the rest to finance another BTL. Possibly buy at auction - add value and then rent out. I guess you would be spreading your eggs into more baskets which isn't a bad thing.

                Comment


                  #9
                  Is the 10K rental income from BTL gross annual rent ? After deducting mortgage loan interest and building service charge and buildiung insurance, what is your annual profit and is it taxed at 40% ?

                  If you repay 45K on your own home mortgage , how much do you save in annual interest payment per year ?

                  Comment


                    #10
                    Here is how I see your cgt situation -

                    If you can sell before April 2014 at 200K, you make a capital gain of 162K over 18.2 years.
                    Since you lived in the property for 9.5 years and you are allowed another 3 years after moving out , you can claim 12.5 years under PPR exemption to capital gains .
                    So the proportion for liable for capital gains is 5.7 years x 162 divided by 18.2 = 51K . If you claim 40K lettings relief and 10.7 capital gains personal allowance , you probably have little or no tax to pay.

                    If you sell in 2016 ( 2 years later ) at 200K, your PPR exemption period will be 9.5 years live in plus 1.5 years after moving out = 11 years for exemption and 9 years BTL period, the profit liable to capital gains tax = 162 x 9/20 =73K.
                    Assuming you can claim 40K lettings relief and 10.7 capital gains personal allowance, you will have 22K left liable for tax at 28% tax rate = 6K approx to pay.

                    Comment


                      #11
                      Based on the detailes and dates you have provided here are the numbers :
                      Purchase 38,000 14/01/1996
                      Disposal 200,000 02/04/2013
                      Total Gain 162,000
                      PRR 103,806 132 206
                      Capital Gain 58,194
                      Lett Relief 40,000 Qual Days 2240
                      Net Gain 18,194
                      CG Allow 10,900
                      CGT 0 2,042 ( Thats due to the HR tax )

                      Regards Peter


                      CGT Bill 2,042

                      Comment


                        #12
                        You should accept Pete's calculation

                        Comment

                        Latest Activity

                        Collapse

                        Working...
                        X