Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • POPPYOSCAR
    • By POPPYOSCAR 14th Sep 17, 7:40 AM
    • 10,533Posts
    • 21,781Thanks
    POPPYOSCAR
    CGT on 2nd property.
    • #1
    • 14th Sep 17, 7:40 AM
    CGT on 2nd property. 14th Sep 17 at 7:40 AM
    Could anyone tell me if I am working this out correctly please?

    Second property bought 1987 sold 2017 so owned 30 years(360 mths) owned jointly.

    Lived in for 9 years = 111mths

    Rented out 15 years = 180mths

    Bought for £70,000 sold for £600,000( gain £530,000)

    PPR = 111+18 = 129mths 129/360 = 0.358
    35.8% of £530,000 = £189,740

    Letting Relief 180/360 = 0.50
    50.0% of £530,000 = £265,000
    Maximum allowed £40,000 x 2 = £80,000

    PPR £189,740 + LR £80,000= £269,740
    Gain of £530,000 - £269,740 = £260,260
    less CGT allowance x 2 - £ 22.600

    Total chargeable gain = £237,660

    Assuming no other income

    £237,660/2 = £118,830 gain per owner.

    First £33,500 at 18% = £6030
    Balance £85330 at 28% = £23892.40
    Total CGT payable for each owner £29922.40

    Thank you.
    Last edited by POPPYOSCAR; 14-09-2017 at 9:06 AM. Reason: Adjusting Tax band
Page 2
    • 00ec25
    • By 00ec25 14th Sep 17, 7:54 PM
    • 4,792 Posts
    • 4,170 Thanks
    00ec25
    But the personal allowance cannot be offset against the Capital Gain so only 33,500 would be chargeable at 18%?
    Originally posted by BoGoF
    oops, early morning pre coffee post thinking of the 18/28% threshold, not the 0/18% one, yes you are of course correct
    Last edited by 00ec25; 14-09-2017 at 8:06 PM.
    • 00ec25
    • By 00ec25 14th Sep 17, 8:03 PM
    • 4,792 Posts
    • 4,170 Thanks
    00ec25
    So the fact that it was owned for 30 years lived in for 9 rented for 15 leaving 6 years bears no relevance to the calculations?
    Originally posted by POPPYOSCAR
    because the gain is so large and the ownership period so long the letting relief is going to hit the £40k cap so in essence the 6 years will not impact the letting relief

    the only way they would make a difference would be if the 6 years were a lived in period and thus could be added to your private residence relief which, as you know, is not subject to a cap. However, I assume you moved out to a new main residence after 9 years and the occupation of the new main residence is a matter of historic fact so you cannot now say the 6 years were main occupation of the old property as a main residence since it wasn't true.
    • POPPYOSCAR
    • By POPPYOSCAR 14th Sep 17, 9:07 PM
    • 10,533 Posts
    • 21,781 Thanks
    POPPYOSCAR
    because the gain is so large and the ownership period so long the letting relief is going to hit the £40k cap so in essence the 6 years will not impact the letting relief

    the only way they would make a difference would be if the 6 years were a lived in period and thus could be added to your private residence relief which, as you know, is not subject to a cap. However, I assume you moved out to a new main residence after 9 years and the occupation of the new main residence is a matter of historic fact so you cannot now say the 6 years were main occupation of the old property as a main residence since it wasn't true.
    Originally posted by 00ec25
    Yes I know.

    I just wondered why the question was asked about the other six years and wondered if it was relevant to the calculations which obviously it is not.

    Yes the new house was moved into and the other one was not selling so it was decided to do it up and rent it out until the market picked up.

    There is no intention to do that hence the calculation based on actual years lived there.
    • POPPYOSCAR
    • By POPPYOSCAR 14th Sep 17, 9:23 PM
    • 10,533 Posts
    • 21,781 Thanks
    POPPYOSCAR
    Thank you everyone for your replies, I am very grateful.

    I have another question.

    If say a third of the property is gifted ,not sold i.e. Value of £200,000 this would rise to a gain of £130,000 and the calculation would be made the same using this figure instead.?
    • purdyoaten2
    • By purdyoaten2 14th Sep 17, 10:03 PM
    • 662 Posts
    • 291 Thanks
    purdyoaten2
    Thank you everyone for your replies, I am very grateful.

    I have another question.

    If say a third of the property is gifted ,not sold i.e. Value of £200,000 this would rise to a gain of £130,000 and the calculation would be made the same using this figure instead.?
    Originally posted by POPPYOSCAR
    Presumably to a relative and ,therefore, a connected person. The 'gift' would be treated as at full market value - no difference made to your sums. However I am not following your new figures!

    Earlier I had assumed that the letting period was reduced by the six empty years when it clearly wasn't and it is still fifteen. I hope I didn't confuse you too much!
    Last edited by purdyoaten2; 14-09-2017 at 10:08 PM.
    purdyoaten lost his password
    • 00ec25
    • By 00ec25 15th Sep 17, 8:09 AM
    • 4,792 Posts
    • 4,170 Thanks
    00ec25
    I just wondered why the question was asked about the other six years and wondered if it was relevant to the calculations which obviously it is not.
    Originally posted by POPPYOSCAR
    if the six years is the sum of the time between the first letting and the last letting when it was not actually tenanted, but was, nonetheless, for those periods being marketed for let, then that can be counted as part of the letting period. However, as per the earlier calculations all that does is raise the letting period to 15/30ths and therefore the 40k cap still takes precedence.

    if the 6 years were periods when it was not being marketed for let, and thus was genuinely a "second home", ie capable of being lived in by you but not your main residence at the time then that period is purely liable for CGT with either PPR or LR obviously

    if some (all?) of the 6 years was periods when it remained your main home but you were absent from it for temporary reasons then some (3 year max) can be added to the PPR period under the absence rules. Alternatively if the reason for your absence was you were living elsewhere for work related purposes in work provided accommodation then of course those rules would kick in and the PPR period would also be increased.

    hence the query about the "6 years"

    There is no intention to do that hence the calculation based on actual years lived there.
    Originally posted by POPPYOSCAR
    in reality it should be done in months or days, not in years
    • POPPYOSCAR
    • By POPPYOSCAR 15th Sep 17, 3:04 PM
    • 10,533 Posts
    • 21,781 Thanks
    POPPYOSCAR
    Presumably to a relative and ,therefore, a connected person. The 'gift' would be treated as at full market value - no difference made to your sums. However I am not following your new figures!

    Earlier I had assumed that the letting period was reduced by the six empty years when it clearly wasn't and it is still fifteen. I hope I didn't confuse you too much!
    Originally posted by purdyoaten2
    Yes to a daughter.

    I am taking one third of the full market value i.e. £200,000 .less amount paid £70,000 should it be 1/3 of the price paid as well?

    Are you saying the CGT would be based on the market value of £600,000 even though 2/3 are still being retained?
    Last edited by POPPYOSCAR; 15-09-2017 at 3:06 PM.
    • 00ec25
    • By 00ec25 15th Sep 17, 3:31 PM
    • 4,792 Posts
    • 4,170 Thanks
    00ec25
    Yes to a daughter.

    I am taking one third of the full market value i.e. £200,000 .less amount paid £70,000 should it be 1/3 of the price paid as well?

    Are you saying the CGT would be based on the market value of £600,000 even though 2/3 are still being retained?
    Originally posted by POPPYOSCAR
    CGT obviously applies to the share being disposed of, so if that is 1/3, then the market value is 600,00 x 1/3 = 200k

    the market value applies only on the acquisition or disposal from/to a connected person, so assuming your original purchase was not from a connected person then your purchase price is what you paid x the share % being sold obviously, which appears to be 70k x 1/3 giving you a gross gain of £176,669
    Last edited by 00ec25; 15-09-2017 at 3:35 PM.
    • jimmo
    • By jimmo 16th Sep 17, 11:36 PM
    • 1,879 Posts
    • 2,347 Thanks
    jimmo
    Assuming your daughter is not a minor, if the idea is to gift a third to her and you will all then jointly sell the property that sounds suspiciously like Asset Splitting, Fragmentation or a combination of both.
    It can, no doubt, be done but requires careful planning and timing HMRC are well aware of such tactics.
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg18150p
    The usual plan is to make the gift in one tax year and sell in the next.
    In that way, if successful, the current joint owners would each benefit from the annual tax free amount and use of any available basic rate band and do the same in the following year.
    The third, new, owner would only gain a similar benefit if the property value increased between the date of gift and date of sale. If you decide to do this you should really expect a hard time from HMRC and leave your daughter's share of the proceeds in her control.
    • POPPYOSCAR
    • By POPPYOSCAR 17th Sep 17, 11:10 AM
    • 10,533 Posts
    • 21,781 Thanks
    POPPYOSCAR
    Assuming your daughter is not a minor, if the idea is to gift a third to her and you will all then jointly sell the property that sounds suspiciously like Asset Splitting, Fragmentation or a combination of both.
    It can, no doubt, be done but requires careful planning and timing HMRC are well aware of such tactics.
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg18150p
    The usual plan is to make the gift in one tax year and sell in the next.
    In that way, if successful, the current joint owners would each benefit from the annual tax free amount and use of any available basic rate band and do the same in the following year.
    The third, new, owner would only gain a similar benefit if the property value increased between the date of gift and date of sale. If you decide to do this you should really expect a hard time from HMRC and leave your daughter's share of the proceeds in her control.
    Originally posted by jimmo
    No that is not the idea.

    Selling now is an option but daughter lives there and would like to stay there if possible.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

310Posts Today

3,230Users online

Martin's Twitter
  • RT @iiSteveJonesii: @MartinSLewis After watching you talk this morning about me burning £300 I got on a comparison site tonight & sure enou?

  • In or near York? This Wed the @itvmlshow Roadshow" will be at the York Food & Drink Festival - do come and say hi; St Sampsons Square 11-4.

  • It's the subtle poetry and lyricism of tweets like this that I find so endearing https://t.co/XhSKBCGyXe

  • Follow Martin