Capital Gains Tax on sale of property

dcg4173

I would be most grateful if someone could advise on my situation.

I have a flat that a bought about 17 years ago for £75,000. I lived in the property for 11 years then moved in with my parents and have rented it out for the last 6. I have now given my tenants notice and will be putting it up for sale on 4 September. The expected sale price is £240,000.

Please could someone advise if I will have any capital gains tax to pay with workings if possible. I really don't understand PPR, personal allowances etc.

Any advice would be much appreciated.

Also to make it a little more complicated, last year my parents transferred a house into mine and my sisters names. I have never lived in this house and it has never been rented.

Thank you.

CLAPTON

basically none


your gain is 165,000

you get 11+3 years PPR relief

i.e. 165000 x 14/17 = 135,800 is exempt

plus you get letting relief of 3/17

so nothing to pay (and that's without using your cgt allowance of 10,900)


your other property has no relevance

nomunnofun

Normally calculated in months but we will use complete years for ease.

The gain is 165000 and you lived in the property for 11/17 of the time. You can also add the last three years of ownership because it was, at some time, your main residence. We now have 14/17.

14/17 of 165000 is exempt due to PPR (135882) leaving 29118.

Lettings relief:

Lower of:
PPR (135882)
Gain appropriate to rented period - £29118
£40000

£29118 is appropriate so no tax to pay.

On the second question - did your parents ever live in this house?

nomunnofun

CLAPTON wrote: »

basically none


your gain is 165,000

you get 11+3 years PPR relief

i.e. 165000 x 14/17 = 135,800 is exempt

plus you get letting relief of 3/17

so nothing to pay (and that's without using your cgt allowance of 10,900)


you other property have no relevance

Sorry - I have posted here in error.

CLAPTON

nomunnofun wrote: »

Sorry - I have posted here in error.

we just crossed in the post: glad we both agree.

nomunnofun

CLAPTON wrote: »

we just crossed in the post: glad we both agree.

Except that I originally wrote 'ignore this post!' and only your post remained in quote form.

Not what I was intending!

dcg4173

nomunnofun wrote: »

Normally calculated in months but we will use complete years for ease.

The gain is 165000 and you lived in the property for 11/17 of the time. You can also add the last three years of ownership because it was, at some time, your main residence. We now have 14/17.

14/17 of 165000 is exempt due to PPR (135882) leaving 29118.

Lettings relief:

Lower of:
PPR (135882)
Gain appropriate to rented period - £29118
£40000

£29118 is appropriate so no tax to pay.

On the second question - did your parents ever live in this house?

No they never lived in it, my brother does as he has recently divorced and lost his job.

xylophone

No they never lived in it, my brother does as he has recently divorced and lost his job

.

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

There is a section of this that was relevant to your parents
"Property that's not your own home
If you sell, give or dispose of a property to your husband, wife or civil partner you don't normally pay Capital Gains Tax. You must have lived together for at least part of the tax year in which you made the disposal.
However, if your husband, wife or civil partner later sells or disposes of the property, they'll have to work out the tax due. It's useful to keep a note of what the asset cost you. Your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of the asset.
You have to work out if you made a gain or loss and any Capital Gains Tax due if you dispose of a property to:
any other family member
your husband, wife or civil partner if you haven't lived with them during that tax year"

You and your sister own this property - if you sell you will need to consider the CGT aspect.

Is your brother paying you/your sister rent? If so, there are income tax considerations.

You would also be landlords. https://www.gov.uk/renting-out-a-property

dcg4173

xylophone wrote: »

.

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

There is a section of this that was relevant to your parents
"Property that's not your own home
If you sell, give or dispose of a property to your husband, wife or civil partner you don't normally pay Capital Gains Tax. You must have lived together for at least part of the tax year in which you made the disposal.
However, if your husband, wife or civil partner later sells or disposes of the property, they'll have to work out the tax due. It's useful to keep a note of what the asset cost you. Your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of the asset.
You have to work out if you made a gain or loss and any Capital Gains Tax due if you dispose of a property to:
any other family member
your husband, wife or civil partner if you haven't lived with them during that tax year"

You and your sister own this property - if you sell you will need to consider the CGT aspect.

Is your brother paying you/your sister rent? If so, there are income tax considerations.

You would also be landlords. https://www.gov.uk/renting-out-a-property

no he's not paying rent, and we are not intending to sell this property. Just wanted to make sure it had no impact on the sale of my flat as it is under my name. So if i'm right in thinking, there is no CGT to pay on the flat when I sell, but if myself and my sister sell the house in years to come there will be CGT to pay on that property?

xylophone

The flat you are now selling is covered at http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm

When you sell or dispose of your own home you won't have to pay any Capital Gains Tax if you satisfy two conditions. For the whole time you've owned it both the following must apply:
it's been your only home or main residence
you have used it as your home and nothing else
You may qualify for this relief if you sell part of the garden without selling your home at the same time.
Working out the relief
To work out the relief, you need to work out the period that you've owned your home for. This starts on the later of:
the date you bought or acquired it
31 March 1982
It ends on the date that you sell or dispose of it.
The final three years (36 months) always qualify for relief. This applies even if you weren't living there during the final three years. It must have been your only or main home at some point during the time that you've owned it.
Restrictions to the relief
You might not get the full amount of relief if:
The garden or grounds, including the site of the house, are larger than 5,000 square metres (roughly the size of a football pitch).
You've used any part of your home exclusively for business purposes.
You've let out all or part of your home (or taken in more than one lodger at a time). But you may be entitled to Letting Relief instead - see the section 'Letting all or part of your home' below.

Letting all or part of your home
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it. But you may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
£40,000
the amount of Private Residence Relief due
the amount of gain you've made on the let part of the property

See https://forums.moneysavingexpert.com/discussion/comment/62695575#Comment_62695575

If you/your sister sell the house gifted by your parents then CGT will apply.

Presumably your parents had regard to their CGT position when they made the gift - they are aware of the IHT position?

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

Cook_County

But you do not have to claim these reliefs if you do not want to. You may believe it is more ethical to pay CGT on the gain.