Capital Gains Tax

SteveCat

saintalan wrote:

Is there a formal or 'preferred' way of declaring this rental business to the IR?

Thanks

Alan

The one thing I would advise is that everything is done through a chartered accountant. They will deal with most things regarding the Inland Revenue and if you get a good one they will always help. It costs but it is worth it imho.

silvercar

The revenue may say that your renovating was maintenance especially as you've let the property until recently. maintenance costs can be allowed against income rather than CGT.

Also assuming your purchase and sale costs are really £400 and £2070.( I would think they should be more, purchase costs should include legal costs, mortgage arrangement and survey costs. sae costs include legal costs and estate agents fees.

sale price less purchase price is £69,000. less those costs of £2569 = £66,431. you've owned it for 9 years (part years don't count), so your CGT liability is reduced by 35% to £43,180.

as you lived in it as your PPR you get CGT relief for the time you owned it and the last 3 years of ownership so that is 32+36 months out of the 118 ie 43,180 x (118-68) / 118 = £18,297 remaining liability.

you also get letting relief, which is the lower of £40,000 and your PPR relief (24,883) so I reckon you have no CGT to pay!

This all assumes you lived in it as your PPR before you rented it out.

Grateful if someone would check my calculations.

silvercar

saintalan wrote:

Is there a formal or 'preferred' way of declaring this rental business to the IR?

Thanks

Alan

phone your local, or current job related, tax office. They should then make a note on your file and add the necessary form to your self assessment requirements.

lavidaloca

How long do you have to live in a property as a main residence before selling in order to avoid CGT please?

gallygirl

silvercar wrote:

The revenue may say that your renovating was maintenance especially as you've let the property until recently. maintenance costs can be allowed against income rather than CGT. Fair point - is laying wooden floors maintenance or renovation if the house was unfurnished Anyway, as you reckon no CGT I'll put what I can on rental declaration. May phone IR about floors etc, I've found then really helpful in the past.

Also assuming your purchase and sale costs are really £400 and £2070.( I would think they should be more, purchase costs should include legal costs, mortgage arrangement and survey costs. sae costs include legal costs and estate agents fees. I had no mortgage arrangement fees, £400 was £175 legal and £225 high value mortgage thingy, forgot about survey so need to check paperwork. Do you think I can claim this bearing in mind it was bought as PPR? Again, doesn't matter as no CGT :j . Sales costs are including estate agents, legal and £100 exit fee (reduced from £225 with quick phone call thanks to this site!!!!!). Negotiated with estate agents and used on line conveyancer.

sale price less purchase price is £69,000. less those costs of £2569 = £66,431. you've owned it for 9 years (part years don't count), so your CGT liability is reduced by 35% to £43,180.

as you lived in it as your PPR you get CGT relief for the time you owned it and the last 3 years of ownership so that is 32+36 months out of the 118 ie 43,180 x (118-68) / 118 = £18,297 remaining liability. :eek:
you also get letting relief, which is the lower of £40,000 and your PPR relief (24,883) so I reckon you have no CGT to pay!:T :T :T . This is the bit I wasn't sure of. Generally think the IR advice is quite easy to follow but this bit had me stumped.

This all assumes you lived in it as your PPR before you rented it out. Yes I did, and TBH I feel quite a lump in my throat about selling it (1st house after marriage broke down, v happy and v sad times there)

Grateful if someone would check my calculations.

_pale_ ooohh, scanned your answer and saw £18,297 remaining liability..... then I read on :T .

Thanks very much for this. I had worked out I had no liability but had no confidence in my answer!

1 more question if I may - if 2 properties are sold in 1 tax year presumably you would do exactly the same calculation. My question is - would the lettings relief apply again? Am assuming it would as it's disposal of a different asset.

Thanks again!

gallygirl

lavidaloca wrote:

How long do you have to live in a property as a main residence before selling in order to avoid CGT please?

There is no hard & fast rule I'm afraid, it needs to be long enough for the tax man to be satisfied. I heard of someone who put the house up for sale the day they moved in and tried to claim it as their main residence when it was sold 4 months later - not surprisingly this was not allowed.

A year is fine I believe, the grey area is in between and would depend on individual circs.

clutton_2

i would seriously recommend you get a good accountant. I have recently changed mine, and he has re-done my last years accounts, as the previous guy had got it so wrong that i would have been paying a shed load of tax in 5 years time. Property is a terribly complex business tax-wise - as this thread has shown. Unless you know how to think/plan well ahead, you may very well be shooting yourself in the foot.

silvercar

ali007 wrote:

_pale_ ooohh, scanned your answer and saw £18,297 remaining liability..... then I read on :T .

Thanks very much for this. I had worked out I had no liability but had no confidence in my answer!

1 more question if I may - if 2 properties are sold in 1 tax year presumably you would do exactly the same calculation. My question is - would the lettings relief apply again? Am assuming it would as it's disposal of a different asset.

Thanks again!

I would see no reason why you would not have letting relief for a second property.

you would only get one lot of CGT allowance in each tax year if you needed it.

BTW that £18,297 was the liability that you would pay tax on at your marginal rate; 40% of £18,297 = £7,318 slightly less frightening.

silvercar

clutton wrote:

i would seriously recommend you get a good accountant. I have recently changed mine, and he has re-done my last years accounts, as the previous guy had got it so wrong that i would have been paying a shed load of tax in 5 years time. Property is a terribly complex business tax-wise - as this thread has shown. Unless you know how to think/plan well ahead, you may very well be shooting yourself in the foot.

Totally agree. A good accountant should more than pay for their fees and give you peace of mind. Would add that you need to find one that has experience in this area.

silvercar

duplicate post.