Capital Gains - Property Sale Question

love2learn

Hi,

I've just sold a house my wife and I owned, we've never lived in it so it should be classed as an investment property.

Purchase Price = £155,000
Sale Price = £179,950
Gain = £24,950

Would I be right in thinking the following...

Both my wife and I have a capital gains annual exempt allowance of £11,100 each = £22,200 total combined exempt allowance. We have no other gains for the tax year. So the taxable sum is £24,950 minus £22,200 = £2750

We also spent £2058.94 on recent repairs to the kitchen which I can prove by receipts. Meaning our combined chargeable gain is the remaining £691.06.

We also have receipts going back 5 years ago for materials I bought to get the house into a rentable condition. Can I also deduct these from the chargable gain? Items such as paint, carpets, blinds etc? Or should I just pay the tax due on the £691.06.

Am I right in my thought process? Or am I missing something?

Keep_pedalling

You cannot deduct anything for repair work, you can however deduct the cost of sale of the property.

Do you have any losses from previous years you can offset? If you have any assets like bank shares you have been holding for years now would be a good time to sell as they will certainly be showing a significant loss.

love2learn

Keep_pedalling wrote: »

You cannot deduct anything for repair work, you can however deduct the cost of sale of the property.

Do you have any losses from previous years you can offset? If you have any assets like bank shares you have been holding for years now would be a good time to sell as they will certainly be showing a significant loss.

Sorry I should have been clearer on the kitchen repair/improvement. Basically I had a burst water pipe equating to about £12,000 in damage that the insurer paid. But they were only prepared to replace the damaged parts of the kitchen. I then had to either have miss matched doors etc, or I had the choice of paying for the entire kitchen to have new work tops, doors drawer fronts etc.

So basically the kitchen was almost completely replaced. This wasn't completely necessary, but was done to improve the saleability of the property. So technically an improvement as opposed to a straight forward repair.

I also have estate agent fees of £1200 and solicitors fees of £1075.76, so those alone come to £2275.76.

I will check with HMRC to see if they would allow the improvement to the kitchen, even though it was opted due to a repair arising. But in any case it looks like my taxable gain is small if only taking the estate agent and lawyers fees into consideration.

I've had some losses on shares held in ISA's, but overall I've made gains as I lost on some, but gained on others.

booksurr

you mention costs of getting it to a lettable condition? Therefore your initial repairs would count as costs chargeable to income tax as part of the letting business so cannot be claimed against CGT.

As for the kitchen, you were not improving it, you were merely replacing like for like: a door for a door, a worktop for a worktop. It would only have been an improvement had there been a very significant quality difference, ie. low end kitchen for high end kitchen.

what about the purchase costs? ie: SDLT, legal fees?

obviously your 2275 of fees on sale are eligible against CGT

jimmo

With regard to the kitchen you appear to be saying that originally there was a nicely matched kitchen, it got damaged and was replaced by a nicely matched kitchen. If so there’s no improvement, just repairs, some of which were funded by an insurance payout. If the water pipe burst whilst the property was being let the costs not covered by insurance will be allowable against your letting income.
Your receipts from 5 years ago may be a bit more promising if you bought the property in a dilapidated condition.
http://www.hmrc.gov.uk/manuals/pimmanual/PIM2020.htm
http://www.hmrc.gov.uk/manuals/cgmanual/CG15201.htm
However carpets are furnishings rather than forming or adding to the structure of the building, blinds may be questionable. (Curtains are furnishings but curtain rails are fixtures being fixed to the walls.) However a key question is whether you claimed those expenses against your letting income. You can’t claim the same expenditure twice.