Working Out Capital Gains Tax?

suzieemm

I sold my maisonette April 9th 2007 which I had owned for a total of 28 years - buying it in October 1979 at a price of £10,950. I lived in it for the first 12 years of my ownership whilst also letting to tenants sharing with me (tax being over the allowance so not calculated on the rent a room scheme) until January 1991 when I brought my house I now live in for around the £45,950 mark. I continued to own the maisonette and let it out to tenants on a shorthold tenancy for the next 15 years of ownership until October 2006, when I then put it up for sale, selling it for £200,000 in April 2007. I am now obliged to declare this as a Capital Gain (although this investment sum now being massively reduced this year due to the credit crunch) but I am not sure how I go about working this out on my tax assessment form, what years do I declare for tax and what allowances and years exemption would I have as I lived in it for those initial years.

Can anyone advise me on how I calculate this rather involved tax assessment? I would rather work this out myself with a calculator than use an accountant as I am sure they would require relevant papers etc which I do not hold or cannot find. Would it be easy enough for me to do with a little help from a knowledgeable person's know how from the tax forum or do I need an accountant? Presumably the cost for an accountant can be included in my allowances on the tax form but I would rather get out my calculator as mentioned.

Can anyone PLEASE HELP?

fubar4164

If I remember capital gains correctly.....

Any gains arising while the property is your principal private residence are exempt from tax, so that would be your first 12yrs or so. Additionally, the final 3 years of ownership are also exempt, even though you were not living there (as it was at some point your PPR.)

That means 15/28th of the gain or so is exempt to begin with.

Then, you should get £40k letting relief, because you have let out your PPR. If you owned the property with a spouse, then you both get £40k.

I don't think you get taper relief as it was abolished last year, but you have a personal exempt amount of approx £9 - 10k.

Then you pay tax at 18% on what's left (which probably won't be too much.)

Plus you get an allowance for the costs of acquisition & disposal.

I would seriously recommend getting an accountant to work out the figures for you.

Hope this has been of some help

silvercar

fubar makes some good points, but the date of sale is crucial. selling in April 2007 means that the old regime comes into play, so taper relief, indexation etc are available to you. (It also means tax is at your marginal rate rather than the new 18% flat rate.)

silvercar

Maybe I'll start a calculation and others can correct/ add input.

Starting point is purchase price (Oct 79)= 10,950
Increased by indexation allowance for time between March 1982 and March 1998 = 1.047*10,950=11,464+10,950=22,414

So the gain is £200k-22.4k less say 5k for buying and selling costs = 172.6k

As you owned the property for more than 10 years you have taper relief reducing the gain to 60% of 172.6=103.6k.

Then you reduce the gain by the time you lived in it as your PPR. This calculation is done in months rather than years, but as an idea you have about 12 years plus the extra concession of the last 3 years = 15/28, leaving 13/28 years=48.1k

You also get letting relief worth 40k to you, reducing the gain to 8.1k. This would be within your personal CGT allowance, so you would have no tax to pay!

silvercar

To those confused by this thread, there was some SPAM posts which have now been removed. Paul Phillips post referred to the removed posts, rather than to the detailed calculation by Jimmo, whose superior calculation should be relied upon, rather than my weak attempt.