How much Capital Gains Tax?

lemontree

A retired friend bought a house to rent out in Nov 2001 dor 31,500.
It is now worth 95,000. How much Capital Gains Tax would he pay if he sold it now? Thank you.

squoog

approx £22,000

silvercar

gain =95,000- 31,500=63,500 less selling and buying costs (legals, survey, estate agent...) of say 3,500; total gain is about 60k.

Five full years of ownership would give 15% of taper relief, reducing gain to 51,000.

CGT allowance of 9,200 (each if it is held in joint names!) so 51,000-9,200=41,800.

Taxed at your marginal rate, 10% as a non-tax payer, 20% basic rate and 40% higher rate. So the gain would move you between tax brackets.

If 30k was at basic rate and the remainder higher rate the bill would be 10,720.

hazzie123

Does this apply to everyone selling their house,or is it only when you have a second house what you are renting?

silvercar

hazzie123 wrote: »

Does this apply to everyone selling their house,or is it only when you have a second house what you are renting?

If you have one home that you live in for all the time you own it you are exempt from capital gains tax ( known as Principal Private Residence or PPR relief).

If you make a gain on any other property sale there could be tax to pay. There are a number of reliefs and allowances to minimise this and the calculations can be complex.

hazzie123

Slivercar I could kiss you right now for your reply!!

I nearly had a heart attack when I read the OP,thought I`d have to pay it aswell.

lemontree

Sorry Silvercar do not quite understand. There is only one owner and he is a Basic Rate taxpayer.

silvercar

Ok, one owner means one lot of 9,200 CGT exemption. My figure of a £41,800 gain is right.

You would add this 41,800 to his income to work out the tax to pay. As the basic rate tax band is less than 41,800, this liability will take him into the higher rate tax band. So some of the tax will be payable at basic rate and some at higher rate.

Incidentally if you sell during the tax year 2007-08, you include it on your tax return for this year. The tax becomes payable by end January 2009.

EdInvestor

There is also letting relief.

silvercar

EdInvestor wrote: »

There is also letting relief.

You have to have lived in the home as your PPR and then let it out to claim letting relief. OP appears to have bought it as a BTL so wouldn't have qualified for letting relief.