Capital Gains Tax on property

twotarts

Hi - Hoping someone can help with a question around CGT and PRR. I'm trying to get my head around whether I have got my head around the right way to work this out so I can plan for what I will need to pay. So, I bought a property in April 2006 to live in. In April 2009 I moved out after buying a home with my wife. I rented the flat out from April 2009 - April 2014 when the tenant was evicted.
The property was then empty until sold in Nov 2015 (basically I spent most weekends from eviction to sale repairing and refurbishing the damage caused by the tenant). I've worked out the following in trying to calculate my CGT liability and would appreciate a steer:
Purchased April 2006 - £149,950
Sold Nov 2015 - £239,950
Initial chargeable gain of £90,000
Rented out for 59 months. Owned for 115 months. So I've calculated 54 months as the time I can claim relief on (36 mths living there and the last 18 months before sale)
So of the £90k chargeable gain, I've taken off:
£3,668 solicitors and estate agents fees
£7,000 cost of improvement works to make it sale ready
£11,100 CGT allowance
So, chargeable gain of £68,232
And to work out the relief I have done this:
68,232 x 54/115 = £32,069.04
So I can claim relief on £32,069.04 therefore £68,232 - £32,069.04 = £36,162.92


So I have worked out that I would need to pay CGT @ 28% on £36,162.92 which would be £10,125


Does this seem right or have I missed something?


Many thanks in advance!!

booksurr

twotarts wrote: »

I bought a property in April 2006 to live in. In April 2009 I moved out after buying a home with my wife. I rented the flat out from April 2009 - April 2014 when the tenant was evicted. The property was then empty until sold in Nov 2015 (basically I spent most weekends from eviction to sale repairing and refurbishing the damage caused by the tenant).

Purchased April 2006 - £149,950
Sold Nov 2015 - £239,950
Initial chargeable gain of £90,000
Rented out for 59 months. Owned for 115 months. So I've calculated 54 months as the time I can claim relief on (36 mths living there and the last 18 months before sale)
So of the £90k chargeable gain, I've taken off:
£3,668 solicitors and estate agents fees
£7,000 cost of improvement works to make it sale ready
£11,100 CGT allowance
So, chargeable gain of £68,232
And to work out the relief I have done this:
68,232 x 54/115 = £32,069.04
So I can claim relief on £32,069.04 therefore £68,232 - £32,069.04 = £36,162.92. So I have worked out that I would need to pay CGT @ 28% on £36,162.92 which would be £10,125
Does this seem right or have I missed something?

You have not claimed letting relief, you deduct personal allowance after all relief, not before it. April 06 - Nov 15 inclusive is 116 months not 115.

Step 1. net gain: 90,000 - 3,668 - 7,000 =79,332

Step 2. Private Residence Relief: if the letting started in April 09 then unless you do the calculation in days (nothing stopping you so doing) your residency ended in March 09, otherwise you are double counting. So the PRR period is April 06 - March 09 is 36 + final 18 months of ownership (Nov 15 - June 14 incl) = 54 months
PRR = 54/116 x 79,332 = 36,930

Step 3. Letting relief period: start in April 09 - ended in April 14 = 61 months not 59. Clearly April 14 does not overlap June 14, ie the final 18 months, so the full 61 months is claimable
LR = lowest of a) b) or c)
a) PRR as step 2 above: 36,930
b) gain in let period: 79,332 x 61/116 = 41,718
c) max allowed 40,000
the lowest is a) 36,930

Step 4. net taxable gain 79,332 - PRR (36,930) - LR (36,930) = 5,472

Step 5. now deduct personal allowance 5,472 - 11,100 = ZERO

you have no net taxable gain but you only get that result by claiming £5,472 of your personal allowance

obviously having done so you will not pay any CGT as your liability is zero

NOTE, the above assumes:
a) you did not get married before April 2009 (or if you did then your wife was living with you in the property - married couples may only have one main residence at a time and it must be the same for both of them)

b) your 7,000 of expenditure are valid improvement costs, not just repairs

[Deleted User]

booksurr wrote: »

b)your 7,000 of expenditure are valid improvement costs, not just repairs

Very valid point particularly as, if there is any doubt, it may be prudent to exclude them altogether if there are no other disposals in the same tax year - there would still be no tax to pay!