Capital gains tax question

[stevewatson]

hi

I have a flat that I've rented out since December 2011, before that date, i lived in it myself. I owned the flat outright with no mortgage.

In December 2011 I moved in with my girlfriend and instead of selling the flat, I decided to rent it out. I had the flat valued at £80k and took out a buy to let mortgage on it for the £60k that I needed.

I'm now trying to sell the flat as my tenant has moved out. Its been valued at £90k and I would accept an offer of £85k on it

My buy to let mortgage of £60k is interest only

so if it sells for £85k i'll be left with 20k once i've paid estate agent fees etc etc and paid off the mortgage.

what capital gains tax will I have to pay please?

[King_Maker]

What was the flat's original acquisition cost and date?

Neither the mortgage nor the valuation in December 2011 are relevant for CGT.

Have you read HMRC's Help Sheet HS283 on the subject?

http://www.hmrc.gov.uk/helpsheets/hs283.pdf

[Dan_Manchester]

Evening,

It doesn't matter about the original cost or date assuming it was your primary property until Dec 2011?

Assuming it was you have loads of relief and no CGT will be payable.

Happy days!

[jpkeates]

That's quite possibly right, but it's a heck of an assumption.
Imagine if it was purchased in November 2011 for £10k?

[stevewatson]

Thanks for the replies

My mother bought it in 1999 for £48k and had it put in my name when she bought it. She lived in it rent free until 2005 when she died. I then moved after her death.

Do I have previous years allowances I can carry forward or something? I know nothing about any of this

Cheers

Steve

[King_Maker]

Why was it put in your name?

What was the agreement between you and your mother?

[stevewatson]

She put it in my name because she wanted to give me a nice gift

She lived there rent free, she never gave me a penny

[jpkeates]

You acquired it in 1999 for £48,000
If sold for £85k you have a rough capital gain of £37k (you can deduct conveyancing costs and other things so this is probably worst case).
Over a total of 15 years ( you need the exact dates because this is calculated daily not annually - this is a back of a fag packet calc).

You weren't living there for 9 years, (but the last 18 months get 100% relief), so it's as if the property was your primary residence for 7.5 years and not for 7.5.
(£37k/15)*7.5 is a taxable gain of £18,500, and your allowance for CGT this tax year is £11k.

So you'll pay tax on the £7,750 at either 18% or 28% depending if you're a higher rate income tax payer or not.
So either £1,400 or £2,100, there or thereabouts.

It's worth checking my figures, though.

[King_Maker]

There should be Lettings Relief to deduct also.

Any capital expenditure?

[jpkeates]

There should be Lettings Relief to deduct also.

Good point, it's something that isn't applicable to my business and I never consider it.

That should wipe out the entire tax liability.

And the £7,750 figure should be £7,500.
I must pay my accountant more...

[stevewatson]

OK thanks for that

How about this scenario...

My mother bought it for £48k in 1999 and straight away put it in both my name and my brothers name.

I bought his half out via a residential mortgage in 2005 , costing me £47.5k (we verbally agreed a value of £95k)

I sell it now for £85k

I have a £60k interest only mortgage, so will see £25k after paying this off

I've never lived there

How much tax would be due on this?

Cheers

[stevewatson]

Forgot to add...

Property rented out since 2005 to date

[jpkeates]

How about this scenario...

I'm not your dancing monkey.

Work it out for yourself.

[stevewatson]

You're on an advice forum and complaining that you dont want to give advice, I think you need to step away from your laptop for a while

[jpkeates]

I decline to give advice to people making up questions.

Others may disagree and answer your question (and to be fair, I got it wrong).