We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
CGT and reliefs available on property rented out?
alibali65
Posts: 21 Forumite
in Cutting tax
CGT and residential property
Simple situation I bought a property and lived in it for 2 years. I met my future wife and moved in with her, my property has been let out for the last 10 years.
We now want to sell the property and expect the profit to be about £45k.
How much tax will I have to pay and what part does the residential property exemption relief play.
Simple situation I bought a property and lived in it for 2 years. I met my future wife and moved in with her, my property has been let out for the last 10 years.
We now want to sell the property and expect the profit to be about £45k.
How much tax will I have to pay and what part does the residential property exemption relief play.
0
Comments
-
you are only exempt from tax if it is your main princciple residence - else you are fully liable for capital gains tax at your highest marginal rate of tax at 10% 20% or 40%.{Signature removed by Forum Team - if you are not sure why we have removed your signature please contact the Forum Team}0
-
LOST wrote:you are only exempt from tax if it is your main princciple residence - else you are fully liable for capital gains tax at your highest marginal rate of tax at 10% 20% or 40%.
BUT because it had been your principal private residence (PPR), you are exempt for the years you lived in it and for a further three years, so by your comments, you've owned it for 12 years, lived in it for 2, so 5/12ths of the gain is exempt under the PPR exemption.
As it was your PPR, you are also entitled to claim lettings relief, which is the lower of the amount of PPR claimed or £30,000 (from memory).
So, if your gain is £45k, the PPR is 5/12 making £18.75k, so lettings relief of £18.75k is also available - total reliefs £37.5k, leaving the chargeable gain of £7.5k which is below your annual CGT exemption assuming you have no other capital gains in the year - you would also be eligible for non-business asset taper relief on the gain, reducing the £7.5k even lower.
So basically, from what you have told us, there is no capital gains tax on the sale, but you still have to report the transaction and calculate the gains on your annual tax return.
NB I am assuming your £45k profit is selling price, less original purchase price, less costs of buying & selling, less costs of any improvements.
Hope that helps.0 -
As it was your PPR, you are also entitled to claim lettings relief, which is the lower of the amount of PPR claimed or £30,000 (from memory).
£40,000 not to be faceious as it make no difference here0 -
Many thanks for the replies,
Next question, is taper relief and indexation allowance calculated on the £45k to begin with then you subtract PPR and costs associated with buying and selling etc0 -
Indexation relief is added to the cost but taper relief is deducted after PPR and letting relief (but before the annual exemption).... it really is a minefield
Here is an example calculation, which should give you an idea (figures and reliefs are for example only):
Proceeds £115,000
Less cost £16,000 (includes buying costs) and indexation £14,665 £(30,665)
Gain £ 84,335
PPR relief 7 years of 22 £(26,834)
Letting Relief
(lower of 40K or PPR Relief £(26,834)
Chargeable Gain £30,667
Taper Relief @ 30% £(9,200)
Annual exemption £(8,500)
Taxable £12,967
Again I stress the above calculation is an example to show how the order of the calculation works.
Do you want to give us your figures and we'll have a go at your calculation?
ToniThe 'Toni' is as in Collette not Swiss
NEW to DFW0 -
Thanks for that Toni, I was on the right lines for calculating tax implications but had some things in the wrong order, your order is more advantageous to me
My situation is I bought the property for £38,500 in 1995 lived in it for 2 years then moved in with my now wife the property has been rented out for the last 10 years (i.e. still rented out now). I may have to sell this year and an example of a similar property has been on the market/sold for £99,950 to give a rough idea of price. My calculations following example went along the line of
Proceeds £99,950
Less cost £38,500 and indexation £5,523 ( I still would have to include selling & buying costs)
Gain £56,227
PPR Relief 5 of 12 £23,427
Letting Relief £23,427
Chargeable Gain £9,373
Taper Relief £3,748 (held for more than 10 years, amount chargeable is 60% of £9373)
Annual exemption £8,500
Taxable -£3,177 No Tax to Pay hopefully0 -
Good news! A simple letter to the Revenue with the above calculation should satisfy them and hopefully 'they' won't make you fill out a Tax Return.
ToniThe 'Toni' is as in Collette not Swiss
NEW to DFW0 -
Many thanks for your help Toni0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354.4K Banking & Borrowing
- 254.4K Reduce Debt & Boost Income
- 455.4K Spending & Discounts
- 247.3K Work, Benefits & Business
- 604K Mortgages, Homes & Bills
- 178.4K Life & Family
- 261.5K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards