Calculating House Sale Profit - Is This Correct?

ck_uk

Have I got the math right for selling a house? (example figures used, joint ownership with one lower rate tax payer, one higher rate).

Purchase Price 150000.00
Refurbishment Costs 15000.00
Sale Price 200000.00
Gain (Resale-Purchase-Refurb) 35000.00

Annual Exempt Amount (Joint = 10600 x 2) 21200.00
Amount Liable to Tax (Gain-Annual Exempt) 13800.00
50% Lower Rate CGT Payable (18%) 1242.00
50% Higher Rate CGT Payable (28%) 1932.00
Total CGT Payable 3174.00

Profit (Amount Liable-Total CGT Payable) 10626.00
Actual Profit Including Exempt Amount 31826.00

Selling Fees
EPC Certificate 100.00
Solicitors fee for selling 800.00
Sellers fee (High Street Agent 2%) 4000.00

Actual Profit Minus Selling Fees 26926.00

Southend1

Did you use your own funds to purchase the property and refurbish it? If not you should include the cost of finance in your calculations too.

anselld

You need to deduct buying and selling fees to calculate actual gain before you start calculating CGT liability.

getmore4less

Purchase price includes all the buying costs.
Selling prices includes all the sale costs

You need to get the tax right before you can work out your profits

Start here and search HMRC site for allthing CGT related.
http://www.hmrc.gov.uk/cgt/intro/record-keeping.htm

anselld

Southend1 wrote: »

Did you use your own funds to purchase the property and refurbish it? If not you should include the cost of finance in your calculations too.

AFAIK finance costs cannot be capitalised.

getmore4less

As it looks like you never lived in the place(did you rent it out) you also have to look at the possibility it is not CGT but income tax you should be looking at if this was a doer upper.

ck_uk

Purchased on BTL basis but decided to sell instead. We paid all the refurb costs ourselves. Spent some time researching to get the above calculation just wanted to make sure it was right. Thanks for the CGT link we'll check that out.

ck_uk

The purchase price does include the buying costs. Would the calculation be correct if the selling costs of £4900 were added to the Sale Price, and the calculation then based on that? But like you say it may be more of a case that it's income tax rather than CGT, hopefully the HMRC site will make that clear..

Icey77

The interest part of the mortgage can't be capitalised, that's a cost that is allowable for income tax only, not CGT. Any mortgage fees and estate agent fees are allowable for CGT though.

silvercar

You may need to look at your refurbishment costs as not all can be counted as capital, if some were in preparation for renting like cleaning up, replacement of worn items etc they may not be allowable for capital gain calculations.

jjlandlord

Icey77 wrote: »

The interest part of the mortgage can't be capitalised, that's a cost that is allowable for income tax only, not CGT. Any mortgage fees and estate agent fees are allowable for CGT though.

All the costs of obtaining finance (mortgage fees, etc.) should be revenue items, not capital.