CGT Allowance & Taxable Profit

mkeeley

Hi

Sorry if this is the wrong forum to be asking.

Two questions. I have a house that I bought 3 years ago and rent out. I'm thinking of selling and upsizing, I'll be liable for CGT as I've never lived there. I bought it for £30K and it's now worth approx. £75K.

Firstly regarding the allowance, £9800 I think for this year, is that all I'm entitled to or is it cumulative, so would be in the region of £19K for the 3 years so I'd be liable for CGT on about £34K?

Secondly does that taxable profit count as income and therefore effect my taxable salary or is it a separate tax? I ask as if it counts as normal income it would place me in the higher tax bracket.

Thanks

wisbech_lad

- It isn't cumulative, but there is taper relief.

- It adds to your income. So, if it pushes you over 40% bracket, you pay 40% tax on some of it.

- Go talk to an accountant, or your local Inland Revenue Office (accountant probably a better idea...)

Gorgeous_George

I think you can put the house in joint names and claim CGT allowance for two people. You might need to be married but I doubt it. Go to google and type 'CGT calculator'. Taper relief isn't very much and BTL in 'non-business'.

I wonder if BTLs can be 'Bed and Breakfasted' to gain the CGT allowance every year?

I make it a CGT bill of £13,580 with one allowance of £8,800 at 40% and £10,160 with two allowances (£7,469 and £5,533 at 22%).



GG

silvercar

Gorgeous_George wrote:

I wonder if BTLs can be 'Bed and Breakfasted' to gain the CGT allowance every year?

To B&B you are going to have to sell it, in order to buy it back. That sale will be enough to trigger the capital gain. if you did sell it every year you would have legal costs, mortgage redemption etc and would need to find someone to sell it to. It would all look a bit like tax evasion IMHO.

Gorgeous_George wrote:

I think you can put the house in joint names and claim CGT allowance for two people. You might need to be married but I doubt it.

Need to be married or in civil partnership, otherwise the sale of half the house will trigger a capital gain.

silvercar

My stab at a tax calculation:

gain : 75-30=40 less estate agents fees, legal costs on sale and purchase say 2k

40-2=38. taper relief for 3 years of ownership is 5%.

38 x 95% = 36.1k

36.1-8.8 CGT allowance = 27.3k

at 40% = £10,920; at 22%=£6,006.

tax payable by the January 30th after the end of the tax year in which it is sold. So sell in the next few months, tax due 30/1/08. Sell after 5/4/07, tax due 30/1/09.

mkeeley

Thanks everyone!