Capital gains tax confusion, please help...

Sunny_Angel

Hi All,

Please can you help, a friend of mine has asked my advice as he knows i frequent this forum, (although not this board:o)

He bought a property 3 years ago for the purposes of letting, for £28,500.
It is now on the market for £82,500. He would accept an offer of £80,000.

Based on these figures how much CGT can he expect to pay? Are any other figures relevant? Sorry have tried to google but even more confused

Tia
Sunny Angel

A_Nice_Englishman

This page explains it quite well.

The calculations would go something like this
He would pay tax on 80,000 - 28,500 - the cost of selling - cost of any capital improvements he made. Say the selling costs were £1500 and he made no capital improvements. That would leave a gain of £50,000.

Assuming he didn't make any other capital gains in the tax year, his exemption allowance of £8800 would be deducted from this leaving £42200.

This would be taxed at 22% (£9064) or 40% (£16880) depending on his rate of income tax.

Ian_W

A possible £54K profit in 3 years ain't too shoddy! There is a fair bit of info about the basics of CGT on:
https://www.direct.gov.uk/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/BeginnersGuideToTaxArticles/fs/en?CONTENT_ID=4016313&chk=dyI1d%2B

He can deduct his buying and selling costs as well as the costs of capital improvements to the property. After 3yrs he will be able to claim 5% taper relief and he also has an £8,800 personal CGT annual allowance [each if jointly owned] which can be offset against the gain. On the face of it, from what you've posted, quite a bit of the gain will be taxable with not too many reliefs available.

Would suggests he sees an accountant to find out the full cost relating to his specific circs.