Capital Gains Tax on the home I sold in 2008

mrlossyman

Hi,

I'd really appreciate some advice before I return a tax form that HM customs have sent me going back to 2006 titled -"possible undisclosed income from let property and gains from the sale"

Basically

1) In 2003 I Purchased a property in Swansea and lived in it until 2006
2) In 2006 my job moved to Surrey, so I rented my property in Swansea, whilst I also rented a flat in Surrey.
3) The Let (my property) was done through an agency. The income was around £400 (with £50 to the agency), my mortgage payment was £380 ish
4) The rent I was paying in Surrey was £600 (meaning I was around £200 out of pocket each month)
5) In August 2007 I purchased a property in Surrey with my partner (I still rented the Swansea home, but placed it on the market)
6) In March 2008 I sold my Swansea property and made approx 48K profit
7) This profit was then paid to my partner who subsidised my proportion of the new properties (in Surrey) deposit (whilst mine was sold)

At the time I did not do a tax return :-(

Now before I complete the return I'd like to know

1) If I am liable for Capital gains tax on the sale of the proprty
2) If I am liable to tax from the income of the property
3) How should I complete the form (any advice)

I am sort of confident I shouldn't pay gains tax as the house was lived in for a number of years as my primary and only residence and I sold before 36 months had elapsed me leaving the property, but I should be exempt? I just need some good advice.

With regards and thanks,

Carl

Slinky

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4020890When you no longer live in the property

Even if you no longer live in your property, you can still qualify for the full amount of Private Residence Relief, provided that:

• the property has been your main home from the time that you bought it
• it has otherwise fully qualified for Private Residence Relief (for example, you have not used part of the property exclusively for business purposes)
• you sell it within three years of moving out or it no longer being your main home

ceh209

Plus, the first £40,000 of 'profit' is not included for periods where the property is rented out.

By the looks of it the property was either lived in by yourself, or rented out. So (by my reckoning - don't take it as gospel!) there's no capital gains tax to be paid.


Can't really advise you properly on the rental income, but I'm sure someone will let you know the details. Basically I believe the interest portion of the mortgage payments is tax deductible. Unfortunately the rent you were paying somewhere else won't come into the equation.

HTH

shane42

i think you owe cgt on a small porportion of cg, ie 8k
as with the rent yes for sure you owe money, it makes no difference the fact you paid rent else where, its not deductable.
As the rent you recieved paid some of your mortgage (,unless the 380 you paid in mortgage was interest only, ) you made money on rent.

Sammy85_2

You pay tax on any rent earned after deducting the Interest part of your mortgage and allowable expenses, such as your agents fees.

mrlossyman

Really appreciate the replies.

What expenses can I off set? I used to drive down at least every month to mainain the garden and make sure all was well. This was costing me about 60 pound in petrol, also had to pay the agent, ground rent and some basic DIY stuff. No longer have the receits as it was 4 years ago.

Jowo_2

There's a tax forum on Landlordzone which has tax specialists as members, plus Landlordzone has info on what counts as valid tax deductible business expenses.

Get yourself an accountant to help you calculate your liabilities and complete the form.

silvercar

1) If I am liable for Capital gains tax on the sale of the proprty
2) If I am liable to tax from the income of the property
3) How should I complete the form (any advice)

1) NO, you are exempt for the time it was your home and the last 3 years of ownership.

2) YES, but the mortgage interest is an allowable expense against the rental income. Looking at your figures it is likely that you wouldn't have had any tax to pay.

3) CGT: include the sale in your tax return in the year of sale, but you will have no CGT to pay. There is a separate page for capital gains tax
income tax: you should have been declaring the rental income and the expenses each year. If you didn't and there is no tax to pay, I doubt the revenue would do more than give you a warning letter. There would be no fine if there is no unpaid tax.