Selling House - Capital Gains Tax

booksurr

lubylucy wrote: »

With regard to CGT, I'm confused how it operates. I thought I could see what we could each gain before paying (£11,100.00) but then my brother found a calculation which also seems to take earnings for the year into account.

your brother has not explained it properly

1. You work out the basic gain. That is the difference between what is actually sells for now less its original value at the date it was gifted to you
2. you split the basic figure into the respective ownership shares
3. from 2 you deduct your own share of any costs of acquiring it (presumably uncle paid the legal fess when he gifted it so unlikely you have any) and the costs of selling it (legal and EA fees)
3. from 2 you deduct your own share of any costs you spent on improving it whilst you owned it. This can be a specialist area because you must know the difference between a capital cost and a revenue cost. A "new" kitchen or bathroom may not always be an improvement cost
4. you now have your own net gain related to your personal share of the property. From that you deduct your personal allowance (currently £11,100 for 15/16) to arrive at your own personal taxable gain

now the bit your brother did not explain properly, how much tax do you actually pay on the figure in 4 above

CGT is payable at 18% and / or 28%.
5. you add up all your gross income (eg how much you earn) before any income tax is deducted, you deduct your income tax allowance (now 10,600 @15/16 rate)
6. you add to that the net taxable gain figure from 4 above to give your total "income" for that year.
7. you subtract 31,785 from the figure in 5. If this gives a <0 that is how much is left of your total "income" payable at 18%. Everything else up to the figure in 6 is then payable at 28%

simple example:
your share of net gain (figure 4) = 50,000
your earnings (figure 5) £718 - 10,600 = 0
total income (figure 6) 50,000 + 0 = 50,000

payable at 18% 31,785 - 0 = 31785 x 18% = 5,721
payable at 28% 50,000 - 31,785 = 18,215 x28% = 5,100
total CGT payable on 50k gain = 10,821

purple_haze

OP, as your uncle transferred the house on condition that he could live in it for the rest of his days it appears an interest in possession trust was created and you and your brothers as trustees should be able to make a claim for principal private residence relief under s225 Taxation of Chargeable Gains Act 1992, which should mean no CGT is payable.

The only question is whether it was an express trust (was your uncle’s right to live there rent free ever recorded in writing?) or an implied (or constructive) trust. If there is no written record of his right to live there, you need to establish that there was a constructive trust – HMRC’s Capital Taxes Manual has a lot of information about this here and on the pages which follow.

You should go and see a solicitor or accountant with knowledge of CGT who could make the claim for private residence relief for you.