Do I need to pay capital gains tax on the sale of my property

marionmackillop

Hi moneysavers,
We bought my house in 2000, and lived in it for a year. We then got a new jobs which had an option to live on site ( and pay rent). We therefore moved out and have rented the property out since then. We do a tax return and have paid the appropriate tax on any profit made each year ( often it was a loss with some of repairs/work we needed to do). Our current tenant leaves next month and we intend to sell the property, and hope to make some money due to the fact house prices have gone up ( likely about £50000). It is the only property we own, and does not have a buy to let mortgage on it, just a normal mortgage. Will we have to pay capital gains tax? Hope someone can help.
Thanks, Marion

Thrugelmir

Afraid so.

http://www.hmrc.gov.uk/cgt/property/basics.htm

RacyRed

You will have to declare the property disposal on your tax returns and the property will not qualify fully for the normal exemption, but please don't panic.

You will be able to claim a couple of reliefs - principal private residence for the first year and the final 36 months and Letting relief for the rest of the time during which it was rented.

Get a tax specialist to help you calculate the gain, as you will have to do it properly and declare it on your tax returns. Trust me, the calculation is quite complicated to do, even when you know what you are doing.

If you owned the house (and declared the rents) jointly then the CGT annual exemption (£10,100 each for 2009/10) may well cover any balance of capital gain due.

chappers

Give us some figures and we can work it out for you
exact date purchased
exact date rented from and to
purchase price
estimated selling price
any major works carried out to it.
is it jointly owned

Hopejack

I would say as a ballpark you won't have to pay CGT. Tbh you'd be better off posting over on the tax affairs part of this forum. I did this when I first joined - did have to give some specific information but in all we seemed OK. We are similar to you in that we have lived in rented for a number of years and so 'our' house was the only one we owned.

You might be able to dig out my old post, if not post over there - there was one chap (Jimmy something?) who was particularly helpful.

marionmackillop

Thanks to all for support - clearly its not simple. Will check out previos posts after this hopejack.

I've got the info for Chappers - We bought for £69000 in April 2000 and lived there until August 2001. It was rented out from end of August 2001 until end of October 2005. it was then empty for about 6 months, and new tenant moved in on April 8th 2006. She moves out on February 7th 2010. It will then be empty whilst we try to sell. It is likely to sell for about £140000 ( I hope). We have not had any work done other than essential repairs, painting and new boiler - but I read that things like that don't count . We have been paying a mortgage all this time - the interest part about £275 a month, and we live on school site where we both work, and pay roughly £275 rent to live in school site as we have evening duties and clubs in evenings sometimes. Very grateful for your kind offer - Thank you.

Marion

CLAPTON

suppose you sell in april

period of ownership =10 years i.e. 120 month
period of residence = 17 month
period of letting = 50 + 46 months = 96 months

(you best check these )


so gross capital gain is 140,000 - 69,000 = 71,000 but you can deduct selling costs

PPR exempt = 17 moinths +36 months = 53

so PPR exemption is 71,000 x 53/120 = 31,358

letting relief the lesser of 40k or 71k x 96/120 so 40k

so total exemption is 71,358 so you owe nothing

and you have a personal allowance of 10,100


the interest you paid can be offset against the rental income you declared on your yearly tax return and can't be offset against capital gains.

marionmackillop

Wow - you are good!

Looks like a close run thing, but we may just get away with it. I should have said my husband owns half house, so I believe we both get 10100 allowance, which I guess will help too.

Could you let me know what PPR is though, as i am very unclued up on all this.

Thank you so much.

Marion

CLAPTON

PPR ..... principal private residence... the official way of saying you were actually living in the house

and you owe nothing anyway and that's before you use your CGT allowances so if you get a better price you will still have nothing to pay