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Help estimating CG tax on property

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peabottle
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Help estimating CG tax on property

#139000

Postby peabottle » May 14th, 2018, 3:07 pm

Hi everyone,
We intend to sell our property we let out, me and my OH acquired the property in April 1992 the price we paid for the property was substantially reduced because of it’s dilapidated state. It was not in a fit state for us regarding moving in or letting out, until repairs were carried out.
We let the property out in September that year.
In February 2005 we started to live there, making major alterations to the property, a two story extension, alteration to the porch by cavity wall insulation, replacing the car parking area with brick weave, whilst still living there. Calling on friends and family so no really big expenditure was laid out, although the property value must have increased somewhat.
In September 2010 we let the property back out, between lets we have had work done damp proofing, timber treatment.
The existing tenants have decided to leave, and we have decided to call it a day.

• Selling price estimate £185,000
• Purchased price £40,500
• Legal expenses £3500
• Receipts before letting £1000

New PVC windows fitted, but unfortunately unable to locate the receipt, this is going back some years.
Both retired, not yet receiving pension, both under our personal tax allowance.

All help would be appreciated.

PinkDalek
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Re: Help estimating CG tax on property

#139020

Postby PinkDalek » May 14th, 2018, 4:51 pm

Broad brush reply only.

1. You'll only get CGT relief for qualifying enhancement expenditure that you've incurred. Plus it needs to be reflected in the condition of the property when disposed. You can't also count anything you've validly claimed against rent for income Tax purposes.

2. You say "we" and assuming jointly owned, you'll both be entitled the CGT annual exempt amount which is currently £11,700.

3. You need to establish the total time the property was used as your Main Residence. This and many other aspects are covered here:

https://www.gov.uk/government/publicati ... elief-2018

That will lead you to the part about Letting Relief which includes:

The amount of relief is the lowest of:

the amount of Private Residence Relief already calculated
£40,000
the amount of any chargeable gain you make because of the letting
<<< ***I can't recall what that means.

Note also The final 18 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.

4. The increases in value pre/post enhancement are not relevant.

5. The CGT rate for residential property is currently 18% for basic rate taxpayers and 28% to the extent that the person is a higher rate taxpayer or the chargeable gains exceed the unused part of the individual’s basic rate band from https://www.gov.uk/government/publicati ... -tax-rates


Very roughly the gain over the 26 years or so is £140,000 (pre any enhancement expenditure). The main residence relief period is about 7 years (the calcs should be done in months or even days). 7/26 x £140,000 = approx. £38,000 leaving the gain at £102,000.

If this is split 50/50 that would be £51,000 each. Each (to be checked) would get Letting Relief (subject to ***) restricted to £38,000/2 = £19,000 and the annual exempt amount of say £11,000 for ease. That would give £21,000 chargeable on each, which should fit within the basic rate and therefore be chargeable at 18%. Assuming you have no capital losses brought forward or claimable on other assets.


As I said, that is all very broad brush. Hopefully others will pick up on my errors but I'll finish with an E&OE.

Edit: I've already spotted a possible error but have no time left. https://www.gov.uk/government/publicati ... ief-is-due includes:

you’ve let your home, do the calculations as shown in Letting Relief above and add the lowest figure to the relief you’re already getting for your home as calculated above – see the examples in CG64737 where the letting period and final period of exemption (18 ... months) overlap

scrumpyjack
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Re: Help estimating CG tax on property

#139034

Postby scrumpyjack » May 14th, 2018, 6:00 pm

You would each do a CGT comp for your individual return and should each get the £40,000 letting relief.
Take that and the CGT allowance and there may well be no CGT to pay

Also don't forget that the last 18 months of ownership counts as part of your occupation of the property even if it was let then

https://www.property-tax-portal.co.uk/t ... e209.shtml

Charlottesquare
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Re: Help estimating CG tax on property

#139065

Postby Charlottesquare » May 14th, 2018, 8:31 pm

scrumpyjack wrote:You would each do a CGT comp for your individual return and should each get the £40,000 letting relief.
Take that and the CGT allowance and there may well be no CGT to pay

Also don't forget that the last 18 months of ownership counts as part of your occupation of the property even if it was let then

https://www.property-tax-portal.co.uk/t ... e209.shtml


The letting relief is restricted to the PPR relief amount, on the figures provided they will not both receive £40,000 letting relief as the gain covered in the 7 year period it was their PPR is not £80,000 ( i.e £40,000 each), the letting relief cannot be greater than the part of the gain covered by the PPR exemption (The roughly seven year share of the £140k gain)

PinkDalek's calc looks about right on the data provided.

peabottle
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Re: Help estimating CG tax on property

#139152

Postby peabottle » May 15th, 2018, 11:07 am

Hi everyone,

Thank you all very much for your input, your comments have been helpful.
PinkDalek, I have taken your broad brush reply regards setting out, and came out with a figure of £4,150 each to pay CGT.
I found your breakdown easy to understand, which is most appreciated.

Kind regards


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