Capital gains loss?

Stuey1980

Hello all,

Here is my scenario:
In 2007 my wife and I bought our council flat valued at £XX,XXX and with a large % discount. We lived there for about 2 years and then had saved enough to move. When we moved we kept the flat on and rented it out. It has been rented out a couple of times and when our last tenant gave notice we decided to sell to get ourselves debt free. Contracts have not yet been signed, but the offer we accepted was £11K less than the valuation before the discount, although was about 15K more than the price after discount.

The question is this:
The running of the flat has been dealt with by self assessment. Firstly, is this a capital gains loss or gain? Secondly, if it is a loss do we need to let HMRC know about it and will we get any tax relief from our self assessment tax?

For further info if it makes a difference, I am a high rate tax payer and my wife is a low rate tax payer.

Thanks in advance for any information that anyone has on this.

Stu

Stuey1980

I see, thanks for that even if it is bad news.

I dont understand, Tenants? We let the property out to tenants, we were not ourselves tenants. Is this what you mean?

CLAPTON

Stuey1980 wrote: »

I see, thanks for that even if it is bad news.

I dont understand, Tenants? We let the property out to tenants, we were not ourselves tenants. Is this what you mean?

When you buy a property jointly you can own the property as Joint Tenants (the usual way) or Tenants in Common


if you don't know then you probably own the property jointly (joint tenants ) or own it equally

in either case you each have a cgt allowance of 10,600 and you have several exemptions so you have no tax to pay.

Stuey1980

Rock on!! Look like the debts are clear and the holiday is on then. I cant believe I was naive enough to think that it was a loss now I think about it.
Thanks,
Stu

nomunnofun

With reference to your first post, you both must declare this disposal even though Clapton has provided you with the good news that there is no tax to pay.

John_Pierpoint

.............because each of you have disposed of an asset worth more than four times the annual nil rate band [10,600 x 4 (?)] and each of you are already required to make self assessment tax returns because you are married and getting half the rent each??

I am just being picky, because I was in a similar situation but a tenant in common with my sister.
We both wrote the same letter explaining why no Capital Gains Tax was payable and sent it in with our annual tax returns. Her letter was accepted, I got a very dusty response and the form to complete, together with the rejection of all the rest of my Income Tax return.

holly_hobby

Yes, even with nil liability, you should include this disposal in your tax return.

As a point to note (and for future ref if you re-enter the lettings market again), as a higher rate tax payer you would have been better holding the property as Tenants In Common, with the majority of title ownership in your wife's names (as a BRT). NB - this dosen't affect any mge liability to which you would remain jointly and severally liable.

Meaning the net rental income would be declared in the same portions under your SA to HMRC ie 99/1 etc, which is faciliated via completion and submission of HMRC Form 17, and would effectively mitigate your tax exposure as a HRT.

Too late now, but worth knowing for the future - simple to effect, but your tax pracitioner will of course be pleased to advise and guide.

Hope this helps

Holly

Stuey1980

holly_hobby wrote: »

Yes, even with nil liability, you should include this disposal in your tax return.

As a point to note (and for future ref if you re-enter the lettings market again), as a higher rate tax payer you would have been better holding the property as Tenants In Common, with the majority of title ownership in your wife's names (as a BRT). NB - this dosen't affect any mge liability to which you would remain jointly and severally liable.

Meaning the net rental income would be declared in the same portions under your SA to HMRC ie 99/1 etc, which is faciliated via completion and submission of HMRC Form 17, and would effectively mitigate your tax exposure as a HRT.

Too late now, but worth knowing for the future - simple to effect, but your tax pracitioner will of course be pleased to advise and guide.

Hope this helps

Holly

As it happens, the last tax return saw my wife paying more tax than me on the earnings from the flat! But then I did have to claim back high rate tax on my private pension so that is probably why.