Capital gains tax question

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    #16
    OK matey, my mistake, sorry about that

    The second scenario is correct, the first is what I might try and get away with if the tax is less than the second

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      #17
      If the value when you bought the property from your brother is credible, you've made a loss on half the property.

      Your "original" half was worth 24k and is now worth 42.5k, a growth of £18.5k. The other half has lost 5k.

      In theory (code for I think this is right but I'm not really sure), you have an overall gain of £13.5k.
      The taxable proportion of the growth is 7.5 - i.e. half (15 less 6 years renting less 1.5 year's stat allowance).
      You have an allowance of £11k, so you have a taxable growth of £1.25k which will be offset in full by the letting allowance.
      So nothing to pay.

      Assuming he didn't live there, your brother might owe some tax from 2005 (which is probably best not mentioned as its so long ago).

      If the value you agreed in 2005 can be challenged, that would change things.
      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


        #18
        Thanks very much for that

        The figures I gave are about spot on

        My mum paid 48k for it in 1999 and we had it valued in 2005 when I wanted to buy my brother out. I got a mortgage to buy him out for 47.5k .... Its now on the market for 90k and I would take an offer of 85k if one comes along. I rented it out as soon as I bought it off my brother back in 2005 until two months a go.

        I can't get my head round any of this to be honest

        Comment


          #19
          Originally posted by stevewatson View Post
          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
          As it has never been your home, there is no PPR nor LR.

          Taxable Gain is £13,500 minus Annual Exempt Amount (£11,000 for 2014-15) = £2,500. Tax is due at 18%/28% depending on your Income for 2014-15.

          I assume that your brother's Gain of £23,500 was reported to HMRC, if appropriate? If not, he could be facing interest & penalties.

          Has HMRC been informed of any rental profit?

          Comment


            #20
            Getting out my tax handbook and going to get this letting relief thing right.
            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


              #21
              Originally posted by King_Maker View Post
              As it has never been your home, there is no PPR nor LR.

              Taxable Gain is £13,500 minus Annual Exempt Amount (£11,000 for 2014-15) = £2,500. Tax is due at 18%/28% depending on your Income for 2014-15.

              I assume that your brother's Gain of £23,500 was reported to HMRC, if appropriate? If not, he could be facing interest & penalties.

              Has HMRC been informed of any rental profit?

              Knowing my brother as I do...he probably didn't LOL

              OH? should I have reported any profit??????

              Comment


                #22
                Yes, rental profit (i.e. after deducting allowable expenses including mortgage interest etc) needs to be reported to HMRC each tax year. What date did the first letting start?

                You need to check with your brother, as voluntary disclosure is preferable to HMRC discovering the situation.

                Comment


                  #23
                  The requirement is to tell HMRC you now have income outside of any PAYE arrangement you might have.
                  Previously there was some flexibility in how HMRC handled that, now they seem to insist on annual self assessment tax returns.

                  On the tax returns you can inform them of any allowable costs that you wish to claim to offset the liability

                  Here's how to advice HMRC ahead of their widely advertised (no me neither) crackdown on property tax avoiders.
                  https://www.gov.uk/let-property-campaign
                  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


                    #24
                    Cheers

                    To be honest (LOL) I've registered with them for back tax through that web site, I'm just not going to declare it all though.

                    Comment


                      #25
                      Thank goodness you didn't register and post here using your real name.
                      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


                        #26
                        True :-) I'm not that stupid

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