capital gains

freda11

ive rented a house out (2nd property) for 5 years and am now selling. what can I expect to pay in capital gains. Purchase price £88k Selling price £135k. Mtg payment interest only £480 pm rent received £550 per month. Mtg in joint names. Lived in property 1 year before renting out. I work part time under tax threshold. Hubby pays 20% tax. Tx

cte1111

Total gain = 135k - 88k = £47k (you can also knock off buying and selling costs, e.g. solicitor's fees and estate agents fees)

Private Residence Relief = (12 + 18) / 72 * £47k = £19,583

Letting relief is lowest of:
PRR
actual gain during let period
£40k, so will also be £19,583

Taxable gain = £47k - (19853 * 2) = £7833

This will be split between yourself and your husband, so you will each have a capital gain of £3197. This is under the capital gains allowance of £11,000.

So presuming no other capital gains this tax year, neither of you will have any tax to pay.

cte1111

NB hope you've both been declaring the rental profit in your income tax returns for each year.

kingstreet

With only £70 a month difference between the income and the mortgage interest, I expect insurance, maintenance, safety checks etc mean very little, if anything, would be taxable.

booksurr

cte1111 wrote: »

Taxable gain = £47k - (19853 * 2) = £7833

This will be split between yourself and your husband, so you will each have a capital gain of £3197. This is under the capital gains allowance of £11,000.

technically if they lived there as co owning married couple the gain is split before the calculation is done, not afterwards

therefore the calculation on those assumptions would be

gross gain: 47k

OP share : 23.5k
PRR 9,792
LR: lowest value is again 9,792

net taxable gain: 23.5 - 9,792 - 9,792, - 11,000 = ZERO. No tax payable. Granted the outcome is the same but the order in which the calculation is done matters

Husbands calculation will be identical.

freda11

Thanks for replies. After doing a bit of googling i need to clarify that when hubby lived there a) we were not married and his name was not on mortgage, he has only been on mortgage for the past 3 years, as I re-mortgaged the property and we added husband onto it then. Also when i first bought it i bought of an ex partner at an undervalue. When ex partner first bought it he bought for £68k. I have read that if bought at an undervalue then for capital gains they will use the figure that my ex partner paid for it, surley that cant b right. Also do i tell hmrc now that the sale is going thru or sfter the sale has completed. I think i may go see an accountant as its so confusing. Also my husband only lived in the property for about a year before we rented it out.

booksurr

freda11 wrote: »

Thanks for replies. After doing a bit of googling i need to clarify that when hubby lived there a) we were not married and his name was not on mortgage, he has only been on mortgage for the past 3 years, as I re-mortgaged the property and we added husband onto it then. Also when i first bought it i bought of an ex partner at an undervalue. When ex partner first bought it he bought for £68k. I have read that if bought at an undervalue then for capital gains they will use the figure that my ex partner paid for it, surley that cant b right. Also do i tell hmrc now that the sale is going thru or sfter the sale has completed. I think i may go see an accountant as its so confusing. Also my husband only lived in the property for about a year before we rented it out.

so there is a whole lot more to it than you listed in your OP - best therefore to go see an accountant and give them the full story rather than have people on here respond to incomplete info and mislead you

if your ex sold you his share of the property which up to that stage you were both living in as your main home then you need to read up on the connected person rule ....