Capital Gains Tax - Query

mp7125

Hi

Wonder if anybody can give some advice on CGT.

A friend of mine wants to sell an ex-housing association 2-bed flat which she bought in 2000 for £44K and is currently valued at around £240K. She lived in the flat 10 years before she bought and 1-year after, before moving abroad in 2001. Since 2001 and November 2009, she rented the property out while firstly she went abroad for about 3 years and then returned to the UK. She has been renting herself since then.

The house is currently empty (since Nov 2009) but she wants to now sell and use the money to buy a home, which will be her primary residence. A few questions, would she incur CGT? If so, how much would she have to pay? Any way to legally avoid?

Thanks

CLAPTON

CGT needs to be worked out using months but for simplicity I'll work it out in years

gross gain is 240,000 - 44,000 =196,000
lets say 4,000 cost of buying /selling
so gain now 192,000

lets say
ownership 10 year
owner occupation 1 year
letting 8 years
empty 1 year


she is allowed PPR (principal private residence relief) for period of occupation (1 year) plus the last 3 years

so 4/10 x 192,000 = 76,888 is exempt
also has letting relief of period of letting, PPR or 40,000 which ever is the lesser
so 40,000

so net gain is 116,800

she also has her CGT allowance 10,100

so taxable gain is 106,700
which is taxed at 18% so tax payable is 19,200

silvercar

If the purpose she went abroad was a requirement of her job (eg armed forces) then she may be allowed PPR exemption for the time she was abroad.

Otherwise I agree with clapton's calculations.

mp7125

Hi that's really useful. She can now try and decide what she wants to do. Many thanks.

noh

I think there may be an error in Claptons calculation.
I think it should be:-

Exemptions are £76888 + £40000 = £116888

Net gain = £192000 - £116888 = £75112

Tax payable = (£75112 - £10100) x 18% = £11702