Need help with CGT calculation please

ck_uk

Can anyone confirm whether the following calculations are correct?
Property bought jointly on BTL mortgage but never let.

I have included example figures

Bought in Dec 2012

Gain = £50000

If we moved in for (say) 6 months and then sold Dec 2015
Period of ownership would be 3 years.
Relief = 2 years (6 months of residence plus final 18 months) out of 3 years
This part of the gain is £33333 (2/3 x £55000)
Remaining gain is £16667
Never let so no lettings relief applies.
Chargeable gain is £16667
Minus annual exemption of (2 x £11000) = £22000 = no CGT to pay

If not lived in at all
Relief = none
Chargeable gain = £50000
Minus annual exemption of £22000 = £28000 liable to CGT
Tax on £28000 is split between low and high rate therefore £2520 + £3920 = £6440 to pay

booksurr

its wrong

you are overlapping the 6 months occupancy with the final 18 months of ownership. That is not allowed.

If you move in now for 6 months that takes you from May 15 to Oct 15 and qualifies you for PRR and therefore the right to claim the final 18 months

18 months backwards from Dec 15 is July 14 which is before you moved in hence overlap is disallowed

your calculation is therefore
owned 36 months Dec 2012 - Dec 2015
exempt PRR period Jul 2014 - Dec 2015 = 18 months
liable period Dec 2012 - Jun 2014 = 18 months

gain 50k x 50% liability - allowance (x2) 22,200 = 2,500 taxable split 1,250 you and 1,250 to partner

the tax payable is not simply all at 18% or all at 28% based on tax basic or HR taxpayer. a basic rate income tax payer can still pay at 28% if the gain is large enough to take their total income (salary + other earnings/interest + gain) over the 28% threshold of £42,385

ck_uk

Hi, desperately trying to get these figures accurate. Can you verify whether, when calculating profit, you include the exemption amount in the final figure, or is this just used in the allowance against calculating the CGT liable?

e.g.

A Purchase Price 150000.00
B Purchase Costs 3000.00
C Refurbishment 3000.00
S Sale Price 220000.00
D Selling Costs 3000.00
Taxable Gain (S-A-B-C-D) 61000.00

Annual Exempt Amount (x2) 22000.00
Amount Liable to Tax 39000.00

50% Lower Rate (18%) 3510.00
50% Higher Rate(28%) 5460.00

Total CGT Payable 8970.00

Profit (Amount Liable-Total CGT) = 30030.00
Actual Profit (inc Exemption Amt 22k) =52030.00

booksurr

define what you mean by "profit" and in what context you mean it

you are not running a business (if you were you'd be liable to income tax not CGT) so "profit" is simply the amount of cash left after all costs and tax has been paid

as i said previously you are still misunderstanding how to calculate the amount of tax payable at 18 and 28%.

you can't get the "profit" until you get that calculation correct and to do so you would have to post up your and your partner's respective total income,interest earnings and all other sources of taxable income so the correct figure is subject to 18% and the remainder is subject to 28%

Vestra

Would this have been your only home? You can only nominate one home for PRR.

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief

booksurr

Vestra wrote: »

Would this have been your only home? You can only nominate one home for PRR.

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief

OP is outside the 2 year time window in which to make the nomination, therefore that is now irrelevant

ck_uk

Just in process of buying another house, does that reset the 2 year time window?