capital gains tax

chada_2

I have 2 houses which i have rented out for the last 5 years.One is worth £150,000 with £120,000 owing on the mortgage and the other is worth £145,000 with £108,000 owing on the mortgage.My question is that i plan to sell the more expensive house and put that money to pay off some of the other mortgage so will i have any capital gains tax to pay and if so is there any way of getting around it.Thanks

TTMCMschine

If its your main place of residence there is no CGT to pay I believe, but if not you are liable to either 22% or 40% on any profit depending on your level of overall income. You can offset costs (legitimate) against it & you might get taper relief, but I don't think so with houses.

Can you avoid it? Yes, just don't pay it, but when HM IR come to visit you, you'll find that they expect a whole lot more from you than you would have paid if you'd not tried to avoid it in the first place.

Also have you been declaring any rental income to the taxman - if not go & see an accountant pronto.

silvercar

If you have ever lived in the property then there are many allowances/ releifs available to you. The answer is to move in (properly) for a time to gain the allowances. If this is not possible then there will be a CGT bill.

The mortgage amounts are not relevent for calculating CGT. The mortgage interest will be an allowable expense to put against your rental income.

If you want me to have a stab at calculating the CGT liability, I need to know month/year & price of purchase and the same for sale. Also any improvement costs (but not maintenance).

You would get taper relief but if you have lived in the property you would also get PPR relief and letting relief.

chada_2

silvercar,i bought the house in May 2002 for £88,500 and am hoping to sell in Dec this year for £150,000.I have been renting it out all this time but have not made any profit from this as the tax man has been informed every year when i do my self assesment.
Also can you tell me how long you have to live in a property to claim it as your main residence and also what criteria they look for to prove its your main residence.i.e Would i have to have the council tax in my name or something else?Thinking of doing this to get away without paying.

Many Thanks,

Simon Cook

boyse7en

CGT due will be £150000 - 88500 x 40% - £9,200 (your yearly CGT allowance)

so about £15,400

CLAPTON

asssuming selling costs of say 2000

then gain is 150,000-88,500-2000=59,500

less taper relief at 15% for 5 completed years gives
50,750
less cgt allowance of 9,200
gives taxable gain of 41,375

actual tax to pay is between 20 and 40 % so max of 16,550.

a. if married you can transfer half the house to you wife and so use her 9,200 too.

b. if you actually live in it and its your PPR then you can benefit from PPR relief and letting relief.
However, although there is no specific period you must live there the HMRC will want to be convinced that you really did.
So having things like council tax in your name and water, gas/electric, bank statements , tax address all there will help.

silvercar

CLAPTON wrote: »

asssuming selling costs of say 2000

then gain is 150,000-88,500-2000=59,500

less taper relief at 15% for 5 completed years gives
50,750
less cgt allowance of 9,200
gives taxable gain of 41,375

actual tax to pay is between 20 and 40 % so max of 16,550.

a. if married you can transfer half the house to you wife and so use her 9,200 too.

b. if you actually live in it and its your PPR then you can benefit from PPR relief and letting relief.
However, although there is no specific period you must live there the HMRC will want to be convinced that you really did.
So having things like council tax in your name and water, gas/electric, bank statements , tax address all there will help.

Clapton beat me to it!

You could knock selling cost (legal and estate agent bills) from the 59,500 to reduce the figure slightly.

The taxable gain is added to your taxable income and charged at your marginal rate, so if your spouse is a lower tax payer than you it makes even more sense to transfer into joint names.

I would add the electoral register to Clapton's list. You would need a minimum of 6 months to be convincing, though in theory it is the fact not the length of time that counts.

Gorgeous_George

I'd say selling costs are likely to be nearer £3K.

Assuming half of the gain is taxed at 22% and half at 40%, even without PPR, the tax is down to £9,710 if in joint names. This would fall to £8,804 if you sell after 1 May 08 due to a slow market.

You could move in and still rent a room

GG

ammunition

Hi I am currently purchasing a new house to in. My current house im looking to keep and rent. Would I beable to move back in, in say 5-10 years time then sell it??? and avoid CGT