Need to sell a flat with minimum CGT please

fellakel

Hi all,
I want to sell a flat due to increasing managing agents fees (will never but a flat again!)
Anyway I am aiming to sell it in the new tax year as I have used this years allowance. so here are some basic facts.

1. Flat puchased July 2003 for £88k
2. Has aways been let out - i have never lived in it
3. Cuurent value about £120k
4. All my CGT will be 40%
5. The flat is just in my name
6. I am not married but will be end of May 07.
7.My "expertise" in shares means I am carrying about a £1500 loss so can dispose of.

Thats it really. I knwo to all you experts out there this is just another CGT question; I am not adverse to paying my bit in tax but too much would really hurt. Many, many thanks for any answers anyone can give.

wayne

silvercar

Ok, I'll have a go.

I'm making assumptions, so correct any that are wrong!

Purchase costs £1,000; mortgage arrangement costs £500, selling legal costs £1,000, estate agents fees £1,000. Mortgage redemption penanlties £500. total costs £4,000.

Gain = sale - purchase cost less expenss = 120-88-4= £28,000

3 years ownership gives you 5% taper relief. £28,000 x 95%= £26,600.

total capital gain = £26,600 - £1,500 share losses = £25,100.
CGT exemption for 2006/07 = £8,800.
Tax payable = (25,100-8,800) @ 40% = £6,520.

options for reducing tax bill; delay sale to after july 2007. This gives you an extra year of ownership and an extra 5% of taper relief. Also CGT relief increases slightly (£9,100 or there abouts I think).

So:

4 years ownership gives you 10% taper relief. £28,000 x 90%= £25,200.

total capital gain = £25,200 - £1,500 share losses (guessing you can carry this forward but check)= £23,700.
CGT exemption for 2007/08 = £9,100.
Tax payable = (23,700-9,100) @ 40% = £5,840.

If you transferred half the property to your spouse after marriage you would each have a CGT allowance to put against half the gain that you would each have.

CGT exemption for 2007/08 = £9,100 x 2.
Tax payable = (23,700-18,200) @ 40% = £2,200.

No liability taken!

Ian_W

And if your wife is not a higher rate tax payer you could transfer more than 50% to her so that you just use up your personal allowance and shares loss and she pays the tax at her marginal rate.

TBH selling after you marry looks the best bet but I would consult an accountant as they can probably save you more than their fees by assisting you to plan the sale in such a way as to minimise the tax liability.

fellakel

Is there a time limit my wife would need to be a joint owner?
i.e. could i transfer 50% one day and sell the property a week later?