Calculating House Sale Profit - Is This Correct?

Kynthia

It depends what you mean by 'profit' as there are different calculations depending on what you are using the figure for. Are you in fact just trying to calculate the 'gain' for CGT purposes which doesn't include revenue costs, or are you trying to work out how much you made on your investment which would then need to include interest on your mortgage?

jackomdj

anselld wrote: »

AFAIK finance costs cannot be capitalised.

The interest part of the repayments can but not the capital element.

jjlandlord

jackomdj wrote: »

The interest part of the repayments can but not the capital element.

No, interests are revenue expenses, not capital.

jackomdj

jjlandlord wrote: »

No, interests are revenue expenses, not capital.

Helps if I read the thread properly. Was answering about annual accounts rather than profit on sale - sorry. That will teach me not to do three things at once.

googler

If you try to sell within 6 months of buying, your calculations may be moot, as mortgage lenders are generally unwilling to lend in these circumstances, so your buyer pool might be limited to cash buyers

purdyoaten

Assuming that this will be treated as Capital Gains tax and that the house has still to be sold, the calculations would be as follows:

Sale Price - £200000 less legal fees £4800 = £195200

Costs - Purchase price £150000 plus legal (say) £1000 plus refurb £15000 = £166000

Capital gain is £29200
Annual exemption - 2 x £11000 = £22000

Chargeable Gain £7200 at 18% and 28%

Each should enter half of all of these figures on the individual Self Assessment return

ck_uk

googler wrote: »

If you try to sell within 6 months of buying, your calculations may be moot, as mortgage lenders are generally unwilling to lend in these circumstances, so your buyer pool might be limited to cash buyers

Hopefully ok as we've owned for approx 18 months

ck_uk

To clarify, yes I guess we're just trying to get a handle on what sort of gain would be made after CGT/income tax (whichever applies). Some of the refurb costs were actually finishing off some building works to make the property habitable. Not sure which of these costs (if any) would be claimable against tax. Also the mortgage payments are interest-only so don't know whether that can be factored in to any extent, or whether you just write that off.. Many thanks to all for taking the time to respond.

purdyoaten

ck_uk wrote: »

To clarify, yes I guess we're just trying to get a handle on what sort of gain would be made after CGT/income tax (whichever applies). Some of the refurb costs were actually finishing off some building works to make the property habitable. Not sure which of these costs (if any) would be claimable against tax.

See no problem - appear to be capital costs.

Also the mortgage payments are interest-only so don't know whether that can be factored in to any extent, or whether you just write that off.. Many thanks to all for taking the time to respond.

Mortgage interest, balances, repayments all completely irrelevant for CGT purposes.