Working out my tax position? if I sell my rental....

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    #16
    Originally posted by bpascua View Post
    When I sell the property I will lose the taper tax relief as it was once my PPR if I am using my wifes CG allowance. Is this correct?
    It appears so, TaxationPete knows his stuff. EDIT: So does King-Maker!

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      #17
      The calculation in post #3 must be amended since the expected capital gain = 420K-250K = 170K over 12 years.
      The gain apportioned under period of letting = 92K and less 40K lettings relief less 11K cap gains allowance = 41K taxable gain charged at 28% = 11,500 approx.

      If property is changed to joint name with wife ( 50% : 50%) before selling, the capital gain made by each is 170K/2 = 85K.

      Then for your taxable gain under period of letting is 85 x 6.5 /12 = 46K which is covered by letting relief and cgt allowance and Nil tax to pay by you..

      And for wife's capital gain = 85K less 11K capital gains allowance and No Lettings Relief = 74 K which is taxable at 18% and 28% . I believe the first 42K is charged at 18% = 7500 and 32K is charged at 28%= 9000 approx. = 16500 total tax due.

      So you may increase the capital gains tax bill if you change to joint names with wife before selling.

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        #18
        Whatever way you decide to calculate your figures, don't forget to offset the buying and selling fees plus estate agents fee's and any costs for enhancements to the enhancements (not repairs). These figures can easily add up to quite afew thousand, so well worth remembering.

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          #19
          Thanks all. In the event of selling the property I would be able to offset my legal costs and estate agent fees? - that's good to know.

          So one final question and I think I know the answer. Assuming I go down the Deed of Trust route with my wife, this is a document and my deeds themselves wont be amended
          I dont think nor the mortgage. Could I get the a deed of trust drawn up, leverage this to offest 50% of the gains made for a couple of year until we sell it.
          Then when I do sell it, its just in my name so I can leverage my full letting relief? sounds too good to be true....

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            #20
            The DOT will not affect your Deeds nor your Mortgage. The DOT will not affect how much you want to borrow against the property.

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              #21
              bpascua,

              You need to distinguish between Income Tax and Capital Gains Tax.

              The DoT can effect both taxes.

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                #22
                Hello Gordon,
                how have you calculated the gain proportioned under he period of letting (92k?) would that not be difference between what the house was worth when I rented it and now? so £420k - 290k = £130k

                Sorry if I have misunderstood.

                Comment


                  #23
                  No, that is not the way CGT is calculated for a PPR. The value when it was rented out is not relevant.

                  The gain is measured from acquisition to disposal, then divided into exempt and non-exempt periods. Lettings Relief is deducted also. Beware of double counting.

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                    #24
                    bpascua,

                    See first line in my post #17, your capital gain over 12 years is 420K-250K =170K . Your 290K figure is not your acquisition cost.
                    I had originally taken your perceived 130K gain for calculation and this figure is not the correct one to use for apportioning your capital gain between "exempt period" for PPR and "letting period" which is liable to cg tax .

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