CGT question

tiamaria

Hi, I have asked this before but as it was before the CGT changes I hope you won’t mind me asking again as the answer is probably different?

Scenario is-

November 1994 – person moves into council flat
June 2005 – buys council flat at greatly reduced price, about 20k:D
August 2005 – moves into partners home and starts to rent flat out
August 2008 – would like to get a property with partner – will there be any CGT to pay?

Many thanks

Tia

m277

Someone correct me if I'm wrong.

I'm assuming you're selling the flat in August 2008.

I believe the last 36 months of ownership count towards your occupancy of the flat regardless of where you actually live and what you do with the flat. So there wouldn't be any CGT to pay because you will have been deemed to have lived in the flat for the whole period of ownership and so it qualifies for full Principal Private Residence relief.

Depending on when you manage to sell your flat, there might be some chargeable gain on the flat. Eg if you sell in September 2008 then prior 36 months only take you to Sept 2005 and so the one month of August 2005 will not be counted towards residence in the flat.
If you don't make any other capital gains in the year then you can use your annual exemption (was £9200 last year- not sure about this year) and not have anything to pay.

silvercar

m277 is correct in theory.

In practice the revenue will examine your case with a fine toothcomb because you have only lived in your flat for 2 months, from when you first bought it, before letting it out. The revenue may have suspicions that you could be fudging the dates. To help your case I would dig out evidence that you lived there for those 2 months.

tiamaria

Thanks, we are possibly thinking of selling and buying a joint property at some stage but I was thinking if we hung on a few years then there'd be a huge tax bill so it'd be better to sell now?

as for evidence, a new tax credit claim was made when he moved & we've declared property income as soon as the first tenant moved in.

tiamaria

Ok, forgive me for the this but i'm financially inept!

the £9,200 - is that the profit you can make without being taxed?

so for instance, if a person made a financial gain of say, 80k, they would be taxed on £70,800? And at what rate is the tax?

Or have i got this quite wrong?

CLAPTON

tiamaria wrote: »

Ok, forgive me for the this but i'm financially inept!

the £9,200 - is that the profit you can make without being taxed?

so for instance, if a person made a financial gain of say, 80k, they would be taxed on £70,800? And at what rate is the tax?

Or have i got this quite wrong?

the CGT allowance this year is 9,600 but yes the principle is correct... and you get taxed at 18%