Capital gains???

new_home_owner_3

Last year we rented our house out, we are going to sell it in the future, but im a bit confused to how much capital gains we will pay, i know people on here work it out so if i give some figures, could someone explain to me?

We have lived in the house 10 years and we bought it for 75000, now its valued at 200,000.

Now i know if we sell it in 3 years we wont pay any capital gains tax, but what happens if we hold onto for 5 or 10 years and then sell, what cgt will we pay then?

My wife and i are both in the lower tax bracket, do we get a tax allownance?

cheers for any advice in advance

simonprest

I dont have the answer but i'll tag my very similar query onto yours and hope someone replys!!
I bought my house in 1999 for 40k, moved out in 2005 (house then valued at £125k) and rented it out, want to sell this year for £100k. What CGT do i pay?! Sounds a simple query but no doubt the answer is complicated!! Thanks IA

fengirl_2

new home owner: If you sell the hosue in 10, 20 yrs time, you will still get the final 3 yrs exemption, assuming the law doesnt change.
The period during which you lived in the house are exempt from CGT, as are the final 3 yrs. So, if you owned the house for 20 yrs and sold it for 500,000, the gain would be 500,000, less 75,000 = 425000. If you lived in it for 10 yrs, then half of that would be exempt and the final 3 yrs also, so the exemtion would be 13/20ths x 425000 = 276250, leaving 148750 chargeable.
In addition, there is a letting relief of up to £40k, so this needs to be deducted, leaving tax to pay on (148750-40000) 108750. Assuming you own the house jointly, you would each be liable to a gain of 54375 (I think, check my arithmetic). At present everyone has an annual exemption of 10,100 and the rest is charged at 18% - your income tax rate doesnt enter into it.
simonprest: Your gain is 100,000 - 40,000 = 60,000. The exempt amount is 6 + 3 = 9/11ths = 49090, leaving 10910 chargeable, which is covered by the letting exemption, so no tax due.
Please note however, that when you do the actual exemption calculation, you need to use months and not whole years.

CLAPTON

basics are as follows

1.you are taxed on the Capital gain less allowable expense (buying / seeling costs plus any improvements made not ,aimtenance))

2. the gain is assumed even throughout the period of ownership... so work out your total period of ownership in months.

3. you get the actual periods you lived there plus the last three year tax free

4. if you rent the you get a letting allowance for the priod of letting or 40,000 which ever is the lesser.

5. you have a cgt allowance of 10,100 per owner (so if joint ownership you each benefit from the cgt allowance)


so lets take any example

selling price 200,000
buying price 75,000
buy/see costs 5,000

so gain is 120,000


suppose you own the property for 15 years
you lived there as your PPR (principla private residence) for 10 years
you let it for 5 years

you should do this in months but I'm doing it in years for ease of doing the maths

your period of PPR plus the last three years are exempt
i.e. 120,000 x 13/15 = 104,000
you get leeting relief for 5 years i.e. 120,000 x 5/15 = 40,000 (which just happens to be the maximum you are allowed)

so your net gain is 120,000 minus 104,000 minus 40,000

so you owe nothing (and you haven't even used your 10,100 cgt allowance )


simon example

gain is 100,000 minus 40,000 less say 3k for costs = 57,000
period of ownersship =11 years

PPR exemption is 6 + 3 =9

so 57,000 x 9/11 = 46,636 is exempt
letting relief 57,000 x 6/11 = 31,000


so again no tax is payable

new_home_owner_3

thank you people, i wouldnt mind paying capital gains if my house was worth 500,000 pound in 20 years:D, i doubt it though.

cheers people

fengirl_2

Sorry, it was the first figure that came into my head - been watching too many property programmes. Clapton is more of this world.

ikebrighton

That info is really useful and it's such a shame that those of us that need help with allowances etc. cannot easily access what we need on the HMRC website.

That said, can anyone advise me if my assumption about my own situation is correct?

I bought a house 8 years ago, lived in it for a year, and then moved in with my partner (we are not married). I have rented my house out ever since then but am now thinking of selling it. If I sell it within the next few months I will have made a capital gain on it of @£100,000. Given what has been said above about allowances, especially the £40,000 I do not think I will be liabel for CGT but can some kind soul confirm if I'm correct? If not, how much would I be liable to pay?

CLAPTON

you get 1 year PPR plus the last three

so 100,000 x 4/8 = 50,000 is exempt
plus letting relief of 100,000 x 7/8 or 40,000 so 40,000

leaving 10,000
if you haven't otherwise used your cgt allowance of 10,100 then no tax is payable

but you should work it out using months

GreenNinja

Hi, I also need some advice please ref capital gains tax. Property was purchased in Jan 96 for 34,950 and sold in October 09 for 117,250. I lived in the property for 2 and half years. Any idea roughly how much capital gains tax I will need to pay?

Any information gratefully received. Do the costs incurred with buying and selling the property get taken off the amount taxed?

Thanks again.

ikebrighton

Thanks so much CLAPTON, at least I know where I stand now and how to work it out when I get a sale.

GreenNinja

Sorry but just giving this a little bump!

If anybody could help would really appreciate it. Also the rental for the period where I wasn't living there, am I right in thinking the first 40k is tax free??

Thanks again for any help.