Capital Gains on Property: Help!!!

binnybin

00ec25 wrote: »

owned Nov 91 - Jul 2010 = 225 months, gross gain during ownership 280,000 - 110,000 = £170,000

private residence relief Nov 91 - Jan 02 = 123 months plus deemed occupancy for last 36 months Aug 07 - Jul 10
total PRR 123 + 36 = 159 months

period not lived in therefore liable to CGT under second home rule Feb 02 - Mar 02 = 2 months

Letting relief period (excl deemed occupancy period) Apr 02 - Jul 07 = 64 months

Letting relief = LOWEST of :
a) PRR £170,000 x (159/225) = £120,133
b) gain during let period £170,000 x (64/225) = £48,355
c) max permitted letting relief cap £40,000 per owner
therefore letting relief capped at £80,000 because of joint ownership (40,000 x 2)


Taxable gain
Gross gain - PRR - (x2) letting relief - (x2) annual personal allowance because of joint ownership
£170,000 - 120,133 - 80,000 - 20,200
= -50,333 ie net gain is ZERO

ie your gain is fully relieved and you have no CGT to pay (assuming you have no other gains in tax yr 10/11 which use up some more of your personal allowance) .

You are also allowed to claim the costs of buying and selling (EA & solicitor fees) but for simplicity i have not included these costs

remember the CGT rates and allowances will change in June when the emergency budget is confirmed so the above calculation will probably be wrong by July 2010

I've created an Excel spreadsheet which works out the figures using formula you just key in your own data in the yellow boxes.

OCec25 I would appreciate if you would validate for me (please PM me your email address)

Once validated if anyone wants a copy please PM me an aemail address and i would be happy to oblige.

davemorton

Would I be able to use this to work out how much capital gains I would owe if I sold a commercial property or is it totally different??

bertboy60

Thanky binnybin that will be very helpful.

binnybin

I do not know anything about commercial property so can't comment. In order to send the (unvalidated) spreadsheet you need to PM me with your email address or else I don't know where to send it.

MrsAmanda_2

00ec25 wrote: »

Letting relief = LOWEST of :
a) PRR £170,000 x (159/225) = £120,133
b) gain during let period £170,000 x (64/225) = £48,355
c) max permitted letting relief cap £40,000 per owner
therefore letting relief capped at £80,000 because of joint ownership (40,000 x 2)


Taxable gain
Gross gain - PRR - (x2) letting relief - (x2) annual personal allowance because of joint ownership
£170,000 - 120,133 - 80,000 - 20,200
= -50,333 ie net gain is ZERO

Sorry, I know this is a very old thread to resurrect, but it's been very helpful as I try to work out if I'll be liable for CGT.

One question about the letting relief.
In the example above, it states letting relief is the lowest of the three options, but then when it comes to working out capital gain, both PRR and the max letting relief amount are deducted. Do we get to deduct both from the taxable amount?

The more I look at this, the more confused I'm getting!!

CLAPTON

MrsAmanda wrote: »

Sorry, I know this is a very old thread to resurrect, but it's been very helpful as I try to work out if I'll be liable for CGT.

One question about the letting relief.
In the example above, it states letting relief is the lowest of the three options, but then when it comes to working out capital gain, both PRR and the max letting relief amount are deducted. Do we get to deduct both from the taxable amount?

The more I look at this, the more confused I'm getting!!

yes indeed
you get PPR
and the last three years
and letting relief

the way letting relief is worked out is the lower of the three items but once worked out then it is added as stated

Elaine_Wilson

Sorry, but I'm confused. Shouldn't the actual calculations be made by each owner on his half share of the property? Then when it comes to looking at the lettings relief we get -

Letting relief = LOWEST of :
a) PRR £85,000 x (159/225) = £60,067
b) gain during let period £85,000 x (64/225) = £24,178
c) max permitted letting relief cap £40,000

So it would be restricted to the gain during the let period and not the £40,000 cap.

In the original question the resultant gain would still be below the annual exemptions, though. Not sure if this is relevant to MrsAmanda.

MrsAmanda_2

OK, here are the stats for the flat I own. I bought it and lived there myself, but then moved in with my boyfriend and rented it out. It's been rented ever since, and is now on the market for sale. Hoping to get it sold before Christmas.

Bought: Jan 2004 for £132,000
Sold (estimate): Dec 2010 for £170,000
Gross profit: £38,000

Principal residence: Jan 2004 - Oct 2005, 20 months
Rented: Oct 2005 - Dec 2010, 63 months
deduct the 3yr allowed: 63 - 36 = 27 months subject to CGT

owned in total for 83 months

Letting relief = LOWEST of :
a) PRR £38,000 x (20/83) = £9156
b) gain during let period £38,000 x (27/83) = £12361
c) max permitted letting relief cap £40,000 per owner



Taxable gain
Gross gain - PRR - letting relief - annual personal allowance
£38,000 - 9156 - 10,100


As my PRR was the lowest of the three options, is that all I am allowed to deduct? Sorry for being so thick, am 39wks pregnant and my brain has turned to cotton wool!!

CLAPTON

MrsAmanda wrote: »

OK, here are the stats for the flat I own. I bought it and lived there myself, but then moved in with my boyfriend and rented it out. It's been rented ever since, and is now on the market for sale. Hoping to get it sold before Christmas.

Bought: Jan 2004 for £132,000
Sold (estimate): Dec 2010 for £170,000
Gross profit: £38,000

Principal residence: Jan 2004 - Oct 2005, 20 months
Rented: Oct 2005 - Dec 2010, 63 months
deduct the 3yr allowed: 63 - 36 = 27 months subject to CGT

owned in total for 83 months

Letting relief = LOWEST of :
a) PRR £38,000 x (20/83) = £9156
b) gain during let period £38,000 x (27/83) = £12361
c) max permitted letting relief cap £40,000 per owner



Taxable gain
Gross gain - PRR - letting relief - annual personal allowance
£38,000 - 9156 - 10,100


As my PRR was the lowest of the three options, is that all I am allowed to deduct? Sorry for being so thick, am 39wks pregnant and my brain has turned to cotton wool!!

the gross gain is 38,000

PPR relief is 20/83 x 38,000 = 9,156
last 3 years is 36/83 x 38,000 = 16,481

letting is the lesser of
PPR =9156
letting period = 63/83 x 38,000 = 28,843
or 40,000

so 9156

so gain is 38,000 - 9156(PPR) - 16,481 (last 3 years) - 9,156 (letting relief ) = 3,200

and you have you 10,100 cgt allowance
so no tax payable

MrsAmanda_2

Thank you so much for clearing that up, it's been making my head hurt!

Another flat we're selling is likely to make a 25k loss, so at least I don't have to worry about the CGT on that !!