Reducing CGT

steve2005

I'll keep this as short as possible for you.

House bought in 2008 cost £185,000
Money from parents in law £100,000
Money from savings £15,000
Mortgage £70,000

Lived there for 3 years until....
House rented out in Jan 2011...
Tenants moved out Jan 2014... house now empty.

House sale price £300,000
Mortgage left £55,000
Money after sale and mortgage paid off £245,000
House improvements total £15k maximum

Total profit £45,000 IF we're able to discount the £100,000 from parents in law is expected back now that we've sold the house AND we can include the house improvements from when we lived there.

Thoughts and opinions?

getmore4less

You have a gain of £115k(adjusted for buying selling costs)
you can't offset loans.

If you have all the documentation to support the capital improvements you will be able to offset those(some may not count if not capital investment)


You then need to apply the various reliefs PRR, last 18month, lettings etc.


Been declaring the rental income?

madgagoo

Gain, ignoring any capital improvements:

Proceeds 300k
Cost. (185k)
Gain. 115k

PPR relief. (79615)
Letting relief (35385)

Net chargeable gain = 0

If you already do a tax return then this must be included, I'd guess you do as you have hopefully been declaring the rental income. If you do not complete a tax return then there's no need to inform HMRC.

zygurat789

getmore4less wrote: »

You have a gain of £115k(adjusted for buying selling costs)
you can't offset loans.

If you have all the documentation to support the capital improvements you will be able to offset those(some may not count if not capital investment)


You then need to apply the various reliefs PRR, last 18month, lettings etc.


Been declaring the rental income?

Not forgetting the annual exemption £11,000 for each co-owner, your wife is a co-owner, isn't she?

steve2005

Thanks for the replies so far.

Yes, wife is co-owner.

madgagoo wrote: »

Gain, ignoring any capital improvements:
Proceeds 300k
Cost. (185k)
Gain. 115k
PPR relief. (79615)
Letting relief (35385)

Net chargeable gain = 0
If you already do a tax return then this must be included, I'd guess you do as you have hopefully been declaring the rental income. If you do not complete a tax return then there's no need to inform HMRC.

Yes we were declaring income, but didn't need to do a tax return as the amount received from rent did not go over the yearly tax allowance as wife has been a student for years it was rented.

getmore4less

steve2005 wrote: »

Thanks for the replies so far.

Yes, wife is co-owner.



Yes we were declaring income, but didn't need to do a tax return as the amount received from rent did not go over the yearly tax allowance as wife has been a student for years it was rented.

What about your share?

steve2005

getmore4less wrote: »

What about your share?

She was sole landlord. I didn't get any income from the rental.

getmore4less

steve2005 wrote: »

She was sole landlord. I didn't get any income from the rental.

Were you married?

HMRC say you can't do that if you both want to own the property.

http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm

zygurat789

Unless, of course, there is a signed Form 17 in force. In which case the beneficial ownership of the property is in the same proportion. There is good reason for this, see how the purchase was financed.
Even with a single beneficial owner there is still no liability to CGT as per the calculation in post #3 above.

booksurr

steve2005 wrote: »

Yes we were declaring income, but didn't need to do a tax return as the amount received from rent did not go over the yearly tax allowance as wife has been a student for years it was rented.

is that the Royal "we"?

steve2005 wrote: »

She was sole landlord. I didn't get any income from the rental.

but you were married so unless you registered a Form 17 with HMRC the income should have been split 50/50 and so "we" have incorrectly declared the income

I notice you are now asking about letting a flat, so since your property empire is expanding best make sure you understand the income tax rules as well as CGT as "we" is used in that thread as well

steve2005

Yes, I'm using we as it's easier than writing we, or the two of us, depending on which thread I'm writing in.

The flat that is being sold was bought when we were not married.
The flat we are looking to rent out was also bought when we were not married.
There is also a third flat but we don't know what we're doing with that yet.