Third property tax calculation help!

EssG

Hi, i've come to selling a house that I've had for around 20 years. The final sale price is £80,000 and I need some help on whether I will be taxed on the property.
The house has been sold for £80,000
The mortgage was for £30,000 for 25years
During the 25 year mortgage I paid £300pm for 15 years (10 years left on the mortgage) and then had a remortgage where I paid £500pm for 5 years. This means that I have paid around £85,000 on the mortgage alone. Will I be taxed on the property or not? If yes, how do I work it out?

terryw

Have you lived there?

kingstreet

The mortgage has nothing to do with it. It is your gain on the difference between the buying price and the selling price which is the issue.

http://www.hmrc.gov.uk/cgt/property/basics.htm?WT.ac=CGT_01

This becomes complicated if this was ever your personal private residence.

Dave_the_Ginger_Cat

HMRC are pretty helpful on this

http://www.hmrc.gov.uk/cgt/property/reliefs.htm

EssG

terryw wrote: »

Have you lived there?

Sorry I should have mentioned it. I have not lived there for 15 years, I had family living there rent free so I've made no money from the property

00ec25

EssG wrote: »

Sorry I should have mentioned it. I have not lived there for 15 years, I had family living there rent free so I've made no money from the property

if you want a proper answer you wioll need to answer the following questions as on the basis of the above answer then yes you are liable for tax

1. are and have you always been the only owner? If there are other owners what % is yours?
2. when did you become the owner and how much did you pay at that time?
3. list the dates that you lived there as your main home, if at any time you simultaneously owned 2 or more properties which was your main home ?
4. did you ever have any form of legal agreement with the "family" which would make then your tenants even though they paid no rent?
5. the sale price is 80k and if the purchase price was 30k then you are looking at a taxable gain of 50k
6. what is your annual salary - this will determine if you pay CGT at the 18% rate or the 28% rate

based on the above answers we can then guide you through calculating your CGT gain and what , if any relief you can claim to reduce the value of the gain

as others note the mortgage and the mortgage payments are irrelevant for CGT

EssG

00ec25 wrote: »

if you want a proper answer you wioll need to answer the following questions as on the basis of the above answer then yes you are liable for tax

1. are and have you always been the only owner? If there are other owners what % is yours?
2. when did you become the owner and how much did you pay at that time?
3. list the dates that you lived there as your main home, if at any time you simultaneously owned 2 or more properties which was your main home ?
4. did you ever have any form of legal agreement with the "family" which would make then your tenants even though they paid no rent?
5. the sale price is 80k and if the purchase price was 30k then you are looking at a taxable gain of 50k
6. what is your annual salary - this will determine if you pay CGT at the 18% rate or the 28% rate

based on the above answers we can then guide you through calculating your CGT gain and what , if any relief you can claim to reduce the value of the gain

as others note the mortgage and the mortgage payments are irrelevant for CGT

1) Yes I have always been the owner of the property
2) I purchased the house around 1989 for £30,000 (25 year mortgage)
3) Lived in the home from 1989 - 1997 then purchased another property that I moved into. Purchased another home in 2004. I currently own all three and live in the one I purchased in 2004.
4)No, there was no legal agreement with the family living there but one of the family members does have a disability.
5) My income is £20k, my wife is around £28k

00ec25

EssG wrote: »

1) Yes I have always been the owner of the property
2) I purchased the house around 1989 for £30,000 (25 year mortgage)
3) Lived in the home from 1989 - 1997 then purchased another property that I moved into. Purchased another home in 2004. I currently own all three and live in the one I purchased in 2004.
4)No, there was no legal agreement with the family living there but one of the family members does have a disability.
5) My income is £20k, my wife is around £28k

Right lets begin...
you appear to be the SOLE owner so your wife has no say in the matter so we will ignore her since she no has liability for CGT

NOTE HMRC require the calculation to be done in months not in years so the following is a very rough approximation, not an accurate calculation

ownership period 1989 - 2013 = 25 years

lived in as main home 1989 - 97 = 8 years

in the absence of a legal agreement (and rent) you are NOT entitled to letting relief as you cannot prove the relatives were genuine tenants. The physical attributes of the occupants are irrelevant to whether you owe tax on your property investment empire!

so...
gross gain 80,000 - 30,000 = 50,000
LESS
a) Private Residence Relief (period lived in as main home) 8/25 x 50,000 = 16,000

b) personal allowance (per owner @ 13/14 tax year rate) 10,900

net taxable gain 50,000 - 16,000 - 10,900 = 23,100

tax payable:
@18% = amount of gain up to the higher rate tax threshold (ie tax code 9440 + higher rate threshold 32,010) - actual income is 41,450 - 20,000 = 21,450 x 18% = 3,861

@28%(residual amount > 18% threshold) = 23,100 - 21,450 = 1650 x 28% = 462

Tax payable = 4,323

total cash after tax paid (ie sales proceeds - tax) = 80,000 - 3,861 - 462 = 76,097

remembering that HMRC are notified of every property sold in the UK, you will therefore need to notify them of this sale since a) there is tax to pay and b) the gross sales proceeds of 80k are above the mandatory declaration limit of x4 the personal allowance, ie > 43,600 and sop you must declare the sale to HMRC to avoid any penalties for... err non declaration !