Capital gains calculator

6feet

Would someone be so kind as to show me a link where you can work out whether you owe capital gains when you sell a buy to let that was also your private residence?

I need a calculator please.....

booksurr

unless your maths is so bad that 1+1 = 3 you do not need a calculator.
There are 5 steps to working out CGT on a property that was both your home and let, read this.... then post your figures so they can be checked

http://forums.moneysavingexpert.com/showpost.php?p=69071134&postcount=6

6feet

Ok, thank you very much. Here is calculation...

Bought April 2010 £365,000
Sold August 2016 £535,000
Gain = £170,000

Ownership time April 2010 – August 2016= 75 months
Owner occupation 51 months + 18 months = 69 months
Rented out = 24 months – 18 months = 6 months
Private residence relief 170,000 x (69/75) = 156,400
Letting relief 170,000 x (6/75) = £13,600

So gain of £13,600 but
Husband + wife = 2 capital gain allowances make it NIL?

booksurr

6feet wrote: »

Ok, thank you very much. Here is calculation...

Bought April 2010 £365,000
Sold August 2016 £535,000
Gain = £170,000

Ownership time April 2010 – August 2016= 75 months

No - purchased in April and sold in Aug makes that 77 months not 75

Owner occupation 51 months + 18 months = 69 months
Rented out = 24 months – 18 months = 6 months
Private residence relief 170,000 x (69/75) = 156,400
Letting relief 170,000 x (6/75) = £13,600

So gain of £13,600 but
Husband + wife = 2 capital gain allowances make it NIL?

With 2 owners (I assume as joint tenants, 50/50?) the calculation must be done separately for each person as you are taxed as individuals, not as a single couple (I appreciate the end result is the same but that is the correct process)

Also, the gross gain 170,000 can be reduced by the amount of Stamp Duty Land Tax paid when you originally purchased the property. For 10/11 tax year the rates for non first time buyers (i assume you were not FTB?) were 1% and 3% so you must have paid £4,700 in SDLT. Obviously you will need paperwork to prove that if you claim it.

You can also claim your legal costs associated with the purchase and its sale, plus the estate agent fee on the sale (if you used one!). Again subject to you having paperwork to prove the amounts claimed.

Unless you have already allowed for those costs in your 170,000 gain, the start point will therefore be lower than 170,000 and should be split into his 'n hers shares.

For the sake of illustration I will ignore the costs (you should not!) and will assume 50/50 ownership with the let period being the final 24 months commencing in Sept 2014 and ending in Aug 16, the correct figures are therefore:

His share of gain 170/2 = 83,000 (less 50% of costs TBC)
PRR 83 x (71/77) = £78,377
LR 83 x (6/77) = £6,623
net gain = 83,000 - 78,377 - 6,623 = ZERO CGT liability

Her share of gain 170/2 = 83,000 (less 50% of costs TBC)
PRR 83 x (71/77) = £78,377
LR 83 x (6/77) = £6,623
net gain = 83,000 - 78,377 - 6,623 = ZERO CGT liability

as a sense check, where the let period is short relative to the ownership period, the letting relief is unlikely to exceed the £40,000 max allowed and so it is unlikely for an ex main residence that there will be a net tax liability even before taking into account personal allowances

also where the property is owned by two or more people then each person gets up to £40,000 of letting relief and of course would also get their own personal allowance on top

so for a married couple they would have a max relief of £102,000 to start with on the sale of their ex main home which had also been let at sometime.

re declaring to HMRC - as the net liability is zero this calculation would not have to be reported to HMRC unless the respective person was already required to submit a tax return. If that is the case then they must report their calculation on their return even though no tax is payable because the value of the property exceeds the reporting threshold of £44,400 ( see here ). The tax return should include a text note in the "other info box" to say the remaining half of the gain belongs to the spouse

6feet

You are extremely Helpful, thank you.

We bought the 23rd of April and sold the 4th of August, so 10 days difference would that still mean 77 months of ownership?

Regarding costs (I wish stamp duty was what you quoted, it was over 10K!!)

Revised purchase price 377,450
sold price minus legal fees (1,326)=533,624
Revised gain= 156,224

Also, we both have to do self assessment due to paying tax on the rental income. I want to have the "asset disposal" all ready to go when we do our taxes in April.

booksurr

6feet wrote: »

You are extremely Helpful, thank you.

We bought the 23rd of April and sold the 4th of August, so 10 days difference would that still mean 77 months of ownership?

Regarding costs (I wish stamp duty was what you quoted, it was over 10K!!)

Revised purchase price 377,450
sold price minus legal fees (1,326)=533,624
Revised gain= 156,224

Also, we both have to do self assessment due to paying tax on the rental income. I want to have the "asset disposal" all ready to go when we do our taxes in April.

OK as you both have to report the sale on your respective tax returns this is no longer an illustrative issue but one where you need precise figures and therefore need to allow for the full technicalities of a real CGT calculation.

1. The period of ownership should (technically) be measured in days. HMRC will allow you to use number of months, but strictly it's days

2. The actual "purchase" and "sale" date depends...

Taxation of Chargeable Gains Act 1992 Section 28

CGT is based on the concept of beneficial ownership. That is very different to legal ownership. You become legal owners when you complete but you become beneficial owners when you become entitled to complete, that entitlement is there if the contract is unconditional and both parties have exchanged contracts so are legally bound to the deal.

It is not the date when you "completed" the sale UNLESS that is actually the date the contract became unconditional. If your contract was unconditional then (for CGT purposes only) the date of disposal is the date you exchanged contracts, obviously that may not be the date you completed if you followed the norm and had a gap between exchange and completion.

4. An unconditional contract is just that. A conditional contract would mean that the date of disposal would be when major conditions ("conditions precedent") were met and is thus most likely to default to completion date. An example of a conditional contract would be the purchaser's offer is subject to obtaining planning permission, ie the purchaser could pull out if they didn't. You need to check the terms of your contract... it is probably more common for an "ordinary" sale to be unconditional when you exchange, since the purchaser is committed to buying and you are committed to selling. The only thing not yet done is to exchange keys for money (ie complete). In that case you would use the exchange date as the disposal date, counting either in days or in months

so your purchase date may be earlier than 23rd April if you unconditionally exchanged before then with your vendor

similarly your disposal date may be earlier than 4th August if you exchanged before then

hence sometimes it is easier to just work in months !

booksurr

6feet wrote: »

Regarding costs (I wish stamp duty was what you quoted, it was over 10K!!)

ooops , yes indeed £10,950 being 3% on 365,000

6feet wrote: »

Revised purchase price 377,450

please don't add your costs on to the purchase price. Your actual purchase price is a matter of historic record held by HMRC, if you inflate it by adding on the SDLT and legal fees and show that figure on your calculation the HMRC computer may have a wobbly. By all means deduct your costs from the gross gain, but show them as separate deductions