Is this CGT calculation correct?

skillboy

I'll try and keep it as simple as possible!

House owned by parents jointly.

House bought in 1982 for £35,000
Sold in 2014 for £280,000
Cost of improvements, buying, selling is £10,000

Net gain is £235,000

They lived in the house for 8 years, let it out the rest of the time.

I calculate their PPR relief at £80,781.25 (11 / 32 years x 235k)

Private lettings relief at £80,000 (£40,000 each)

CGT allowance 2014/15 at £22,000 (£11,000 each)

Taxable gain is therefore £52,218.75.

Is this correct? Any feedback appreciated. Thanks

booksurr

the calculation must be in months not years
house purchased before 31 March 1982? If yes the value at 31 March 1982 must be used, not the actual purchase price

sold before 6 April 2014?
if yes - your calculation mechanics are correct subject to required greater accuracy using months which may therefore also impact the LR cap making it less than £40k,
if no - it isn't (18 months not 36) which will certainly impact the LR figure as well

skillboy

thanks a lot. Actually the property has not been sold, it will probably be gifted to my sister in the next few months, but the same CGT calculations apply I suppose?

I did read that the Government does only allow you to add on 1.5 years at the end instead of 3 years...thanks for pointing that out...

booksurr

skillboy wrote: »

thanks a lot. Actually the property has not been sold, it will probably be gifted to my sister in the next few months, but the same CGT calculations apply I suppose?

I did read that the Government does only allow you to add on 1.5 years at the end instead of 3 years...thanks for pointing that out...

sorry to be a pedant but you really must talk of 18 months not 1.5 years !

as it will be a gift between "connected persons" your parents had better make sure the valuation they use is adequately documented since it is that which will drive the liability calculation - this thread may amuse (inform?) you in that context ... https://forums.moneysavingexpert.com/discussion/5015047

skillboy

Ok I got it, 18 months it is!

When you say I need to get an adequate documented valuation, what exactly do you mean? I was planning on just getting a couple of estate agents to come and do a valuation report and use the average price as the "selling" price. Is that enough do you think?

purdyoaten

skillboy wrote: »

Ok I got it, 18 months it is!

When you say I need to get an adequate documented valuation, what exactly do you mean? I was planning on just getting a couple of estate agents to come and do a valuation report and use the average price as the "selling" price. Is that enough do you think?

No. Engage an independent estate agent/ valuer and obtain a formal written valuation to retain.

skillboy

ok will do, thanks a lot.