Capital Gains Tax

AgentOrange

Hi all, I have a question regarding Capital Gains Tax on my partners property. We know next to nothing about this and everyone we've asked tells us something different. She owns a studio flat in Bethnal Green but she's just signed on as joint owner of my property in Brighton. Our issue now is do we sell her place (she would've been renting it out for two years this coming February) to avoid CGT. As far as we can work out you only pay CGT on the flat's value - the current mortgage so if we remortgaged the bejesus out of it we'd have to pay a minimal amount. Is this right?

Tassotti

Was the flat in BG her main residence before letting it out?

If it was, there will be no capital gains tax due. (last 3 years don't count)

If it was always a BTL, there will be cap gains tax due. Sale price less purchase price. Remortgaging it will make no difference (nice thought though)

howard_yates

Hi have been to local tax office over this issue. C.G.T is applicable to the difference of the price of the flat when you had it as your sole residence (2 years ago) when you started to rent it, and the actual price that you will recieve on the sale of this flat eg 50,000 value prior to renting and now actual selling 60,000 therefore C.G.T only apllies to the difference eg 10,000, also dont forget C.G.T allowance is 8,000 in any tax year so you would claim that allowance in the year of sale so you would only pay on 2,000. Also C.G.T has a sliding rate of pay over 10 years, 40% for the first 3 years you are renting and then reduces by 2% each year up to 10 years to the minimum of 24% this is called taper relief. Hope this helps i had to make many journeys for this info and they dont like telling us what we can claim, anyway take care...H

howard_yates

hi again yes forgot to mention as stated by other post about last 3 years and main residence sorry...H

silvercar

howard_yates wrote:

Hi have been to local tax office over this issue. C.G.T is applicable to the difference of the price of the flat when you had it as your sole residence (2 years ago) when you started to rent it, and the actual price that you will recieve on the sale of this flat eg 50,000 value prior to renting and now actual selling 60,000 therefore C.G.T only apllies to the difference eg 10,000, also dont forget C.G.T allowance is 8,000 in any tax year so you would claim that allowance in the year of sale so you would only pay on 2,000. Also C.G.T has a sliding rate of pay over 10 years, 40% for the first 3 years you are renting and then reduces by 2% each year up to 10 years to the minimum of 24% this is called taper relief. Hope this helps i had to make many journeys for this info and they dont like telling us what we can claim, anyway take care...H

Not the same as the info I have. The purchase price and the sale price are the chargable events. The difference is the gain (less allowable expenses). You get exemption for the time its been your principal private residence and the last 3 years of ownership (provided it was once your PPR). You take this time as a percentage of the total ownership time and apply that to the gain.

eg. live in it for 4 years, own it for 10 in total. chargeable gain exempt on (4+3)/10 =70%. so you pay tax on 30% of the gain.

clutton_2

get an accountant !!!!! - one who has his own property portfolio !