..another CGT question ;-)

hearts

My brother has owned a home which he has let out since 1989. He is a basic rate tax payer.

He paid 7k for the excouncil flat in 1989 it is now valued at 115k. If he were to sell soon what would his CGT bill be.
Thanks

hearts

Al_Mac wrote: »

I think nothing.

eh? how come?

hopon

Did he live in it as his own home?

Any money been spent on improvements, if so how much and when?

hopon

Al_Mac wrote: »

To be honest I thought once you had owned a property for a certain amount of time, it became exempt.

You thought wrong I'm afraid

silvercar

you bought for 7k

There is some indexation relief from 1989 to 1998 of about 0.4 so the 7k increase to 7 + (7 x 0.4) = 9.8k say 10k.

then the gain is 115-10k less expenses of say 5k= 100k.

you then get relief for the time it was your home and the last 3 years of ownership. Say you owned it for 3 years before letting it. So 6 of the 22 years are free of tax 105 x 6 /22 = 27.3

you then get letting relief for letting something that was your main home, this has a maximum of 40k or your residence relief in this case 27.3.

100 -27.3-27.3=45.4

This is now reduced by taper relief = max of 40%. ie reduced by 18.2 to 27.2

On top of that you get a CGT allowance of 9,200.

So final CGT liability would be about 18. If this was all within your basic rate tax band the tax would be 20% ie £3,600

To be included in your tax return and payable by the January following the end of the tax year = jan 2009.

All back of the envelope with assumptions, so don't rely on my calcs.