Capital Gains question

safara

Hi All,

A question about Capital Gains Tax on the sale of a property.

We bought a new place - moved in, and are selling the old place.

We bought the new place in Nov 2011, spent a year doing it up (complete renovation, the place was derelict), then moved in October 2012

Old house went on the market March 2013

It used to be the case that there was a 3 year relief from CGT, ie we need to have the old place sold by Nov 2014 (or Oct 2015 as we technically did not own 2 homes as the new one was just a shell, no bathroom, no kitchen, no electrics etc etc)

But, I note on the HMRC website it mentions

"In his Autumn 2013 statement the Chancellor announced that from 2014-15 this final period relief will only apply to the final 18 months of ownership. There will be an exception for people who are disabled or in long-term care. This measure is set to become law later in 2014."

Does this mean that in one fell swoop, we are now liable to CGT as we are outside of 18 months ? And this applies to everyone that was in between the 18 month to 3 year period ?

Or is it only applicable for properties bought/sold from the date it comes into force?


On another note - the Annual Exempt amount that is £10900. Does this count only once? Or twice if the property is jointly owned by myself and my wife?


Cheers

Safara

Tixy

Anyone who has not exchanged on their property sale by 6 April 2014 will only get the 18month relief (except for the disabled/long term care exceptions).

Yes if you jointly own the property then you each have your own CGT annual allowance.

CLAPTON

safara wrote: »

Hi All,

A question about Capital Gains Tax on the sale of a property.

We bought a new place - moved in, and are selling the old place.

We bought the new place in Nov 2011, spent a year doing it up (complete renovation, the place was derelict), then moved in October 2012

Old house went on the market March 2013

It used to be the case that there was a 3 year relief from CGT, ie we need to have the old place sold by Nov 2014 (or Oct 2015 as we technically did not own 2 homes as the new one was just a shell, no bathroom, no kitchen, no electrics etc etc)

But, I note on the HMRC website it mentions

"In his Autumn 2013 statement the Chancellor announced that from 2014-15 this final period relief will only apply to the final 18 months of ownership. There will be an exception for people who are disabled or in long-term care. This measure is set to become law later in 2014."

Does this mean that in one fell swoop, we are now liable to CGT as we are outside of 18 months ? And this applies to everyone that was in between the 18 month to 3 year period ?

Or is it only applicable for properties bought/sold from the date it comes into force?


On another note - the Annual Exempt amount that is £10900. Does this count only once? Or twice if the property is jointly owned by myself and my wife?


Cheers

Safara

well you are liable for cgt although the amount may well be zero depending upon the details


if you would like to say when you bought the property and at what price and how much you are likely to sell for we may be able to help

the cgt allowance is 11,000 per person

da_rule

CLAPTON wrote: »

well you are liable for cgt although the amount may well be zero depending upon the details


if you would like to say when you bought the property and at what price and how much you are likely to sell for we may be able to help

the cgt allowance is 11,000 per person

And also the fee's you paid when you purchased it (legal fee's etc but not capital gains), and an estimate of the fee's you'll have to pay when you sell it (legal fee's, estate agents fee etc).

safara

Many thanks for the replies

Some further details to help answer my question.

Bought in 2000 for £43,000
Spent about £6000 over the years on value added things like double glazing etc.

Not sold yet, but working on example selling for £100,000

So, is that 100,000
- £43,000 (original purchase price)
- £6,000 for improvements
- £21,800 for Annual allowance
= £29,200 liable for CGT (at 18% = £5,256 )

General figures above just to get my head around it.

Is that right?

Mattygroves2

To do it properly you need to know exactly how many months fit into each category but broadly using round figures the gain will be something like:

Gross gain = 100,000- 43,000 - 6,000 (if you can prove them) - 2,000 (estimate of buying and selling costs) = 55,000
Total ownership = 2000 to say Aug 2014 = 164 months
Time as PPR = 2000 to Oct 12 (I may be wrong on this as it may be Nov 11) = 142 months + last 18 months

PPR relief = (142+18)/164 x 55,000 = 53,658

Gain that would be taxable = £55,000 - 53,658 = £1,342 which is more than covered by the two allowances available.

The longer you leave the selling the bigger the taxable gain but it is highly unlikely you'll pay tax.

safara

Ahhhh - does the annual allowance count year on year? Not just a one off figure? The PPR?

Mattygroves2

Annual allowance only counts in the year you sell - you can't carry forward unused allowances.

PPR is Principal Private Residence relief and is given for the period you lived in the first house. The whole gain gets apportioned over the total number of months owned and then an allowance is made for the months you lived there plus the last 18. The longer you leave it before selling the greater the proportion of the gain that falls into the non PPR category so the more you risk a taxable gain. If you rent the old house out though there is another relief called letting relief which will cover a bit more gain.

da_rule

safara wrote: »

Ahhhh - does the annual allowance count year on year? Not just a one off figure? The PPR?

Year on year? It's an annual exemption, i.e. you can make £11,000 of gains per person per tax year without being charged.

PRR is Principle Residence Relief. This means that you are entitled to relief for the time that the property was your primary residence (so before you moved into your new house).

If you and your partner one the property in equal shares then the gain will be halved and charged to your annual exemption.

safara

Ahh - OK - I have some more to read on the system then - I was unaware that there was an element that applied for the length of time you owned the property.

I was going from the hmrc website at http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm#1

Geez they make this stuff complicated.

Am I best advised to seek the assistance of an accountant following the sale of the property to tick the boxes etc?

Or is it easy enough to do individually?

Or, just sell the damn place and not bother with this unless asked?

00ec25

safara wrote: »

Ahhhh - does the annual allowance count year on year? Not just a one off figure?

the personal allowance is per person and is a one off figure for the tax year in which the item is sold, it is not cumulative, you use it or you lose it

I will assume that "we bought" means you own it as joint tenants, so of the 100k gain you each need to account for 50% of it individually since that would be your share as a joint tenant - so using mattygroves figures your share would be 55,000/2 - 27,500

safara wrote: »

The PPR?

you can deduct the portion of the gain which occurred whilst you lived in it as your Principle Private Residence.
I will assume you you did not make a PPR election within 2 years so HMRC will assess the position on the facts, clearly with the new property being uninhabitable you PPR period continues until Oct 12 as those are the facts of your living arrangements so the exempt gain is (142+18)/164 x 27,500 = 26,829

you then have your own personal allowance of 11,000

your net taxable gain is therefore 27,500 - 26,829 - 11,000 = ZERO . No tax to pay at all . Your partner will have the same calculation and end result

safara wrote: »

Or, just sell the damn place and not bother with this unless asked?

HMRC are notified of every property related transaction anywhere in the UK so that would be rather foolish... seeing as the system is Self assessment not wait til I'm found out assessment