Capital Gains - Rented Property

harleyfanatic_2

I have read various threads on CGT and still cannot fathom out my liability if I decide to sell a property I rent out. I am hoping someone can help!

Bought house in Nov 1999 for £71k - costs say £500
Lived in until Aug 2004 when I moved out and let to tenants
Now live in second property which I bought in Jan 2004

If I now sold for £170k at a disposal cost of £2500 what CGT liability would I have now whilst I am working (40% tax payer) or in a few months when I retire (basic rate).

I haven't spent anything on improvements.

Thank you!

medders2604

In my non expert opinion it goes like this but am sure someone will come along and correct me.

Your income tax band does not matter now as CGT is a flat rate of 18%

So your gain is £170,000 - £71,000 - £2,500 - £500 = £96,000

You have so far owned the property for 111 months and lived in it for 58 months. The last 6 months is also an exemption so 64/111 = 57% of your gain is exempt

43% of £96,000 is £41,280 this is your chargeable gain

I think the annual exemption is £9,600 this year (check this as well) so £41,280 - £9,600 = £37,680

You pay 18% on this so bill of £6,782.40

Am sure an expert will be able to check this but thought it would be good for me to do for practice as well.

CLAPTON

It works like this

gross gain = 96,000
less

1. Principal private residence relief PPR is based on period of residency plus last 3 years (36 months )

so owned for 111 months
residency for 58 months plus 36 = 94

so PPR relief 96,000 x 94/111 = 81,297

2. less letting relief 40,000 (max allowed)

so gain = 96000-81,297-40,000 = zero

result !

medders2604

Where did I manage to get 6 months from?????? Crikey I know its 3 years but must have been having a moment!
Completely forgot about letting relief though.

koolcat99

I do not know your situation, but in mine I could do with the cash for other ventures. My accountant has advised me to sell as a last resort.
He told me,
1. you have a poor pension in comparison to what you are earning right now so that could boost it in the future,
2. Its not a good time to sell.
3. CGT cannot be avoided or dodged.
4. There is a chance (not a big chance) but that in the event I had nowhere to live then I could live there as a back up, if at that time I wanted to sell there would be no CGT.
I have decided to let it out again, but its been 2 MONTHS and no tennant yet.... I have reduced the rent by 20% stil no interest. In the past it has been snapped up the minute it was advertised, I had people throwing deposits at me. I could pick and choose my tenants.
Now nothing......
Dont know why.. I have a friend of a friend of a friend who may take it but is on DSS, I am hoping they will take it as 2 mortgages is killing me.

Kynthia

koolkat99

Are you advertising through an agent? If yes, what reason have they given for the lack of tenants and how does your rent compare with other properties being advertised?

I had a flat advertised for nearly six weeks with no offers, then I rang a bigger agency who had two potential tenants fighting over the property two days later. I hadn't even signed the contract with the new agency yet!

Good luck

Pee

What is letting relief?

silvercar

This explains it well:

http://www.property-tax-portal.co.uk/taxquestion49.shtml