One off windfall and tax credits

andyandflo

ukjoel wrote: »

Thanks again - but really want to be 100% sure on this as it sounds too good to be true.

I can sell my second home for 200k.
Due to various allowances (ie fact I lived in it for 4 years) means that 7 of the 10 years of ownership dont qualify for cgt and the remainder it was rented so again taxed on income so CGT is within my annual allowance.

So even though I am selling this asset because there is no CGT to pay I dont need to tell the tax credit office about it.

It just seems wrong (not that I am complaining) that I can still be getting paid a grand a month tax credits and child benefit and yet still be getting this one off payment without it having any impact on my tax credits.

Apologies for keep bouncing this back to you but it sounds almost too good to be true.

1. Yes you have identified the factors relating to CGT correctly. The period that it was your principal private residence for 4 out of the 10 years of ownership makes any 'profit' for that period exempt (4/10ths of the profit).
The balance will be treated as a Capital Gain. With your personal allowance for each of the other 6 years and other associated reliefs, you will only pay tax on that difference - if any.
However in your case if the sale of the property was a profit on the disposal of a 'business asset' - then Income Tax would be due instead - if any.
The way to look at it is to determine to your advantage whether you considered the property after you left it to be an investment (like stocks or shares) and that you had an income from it, or was it part and parcel of a business activity (property developer) in that you notionally sold the property to the business with a corresponding outstanding loan due to you from the business equal to the asset's value. Go for the scenario that gives you the best advantage and the least liability.
2. Yes you will have to tell HMRC of it's disposal no matter how you decide it was. That can be done on your normal tax return and in the case of a business asset also in your accounts - ie disposal of an asset that was previously shown on your balance sheet.
3. You are only to notify HMRC for TC purposes of interest received or earned in excess of £300.
However you must remember that if the profit from sale of the property is treated as a business profit, it should also be disclosed as income in the final year/period of trading.