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CGT and Letting Relief

edited 30 November -1 at 1:00AM in Cutting Tax
50 replies 10.9K views
245

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  • edited 29 July 2018 at 6:45PM
    00ec2500ec25
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    edited 29 July 2018 at 6:45PM
    sean07687 wrote: »
    I bought my house (a one-bed cluster home) in 1993 and it was only my sole residence for 3 years, I moved to London for work and only use the house occasionally. ...

    I bought the house for 45K in 1993
    Market value is now around 250K
    I have owned it for 25 years
    And I earn 43K (If this is relevant?)

    My thoughts are its about 40k owed but I'm pretty sure that is not correct.
    so why did you keep the house for the last 22 years if you only use it occasionally?

    gain 205k
    prr 205 x 4.5/25 = 36,900
    allowance 11,700
    net taxable gain 205,000 - 36,900 - 11,700 = 156,400

    @18%
    43,000 - 11,850 = 31,150 against basic rate band 34,500 so 3,350 left from basic band
    3,350 x18% = £603

    @28%
    156,400 - 3,350 = 153,050 x 28% = 42,854

    total tax payable £43,457
    for illustration only, the real calculation cannot be done in years
  • saajan_12saajan_12 Forumite
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    sean07687 wrote: »
    I bought my house (a one-bed cluster home) in 1993 - what month? and it was only my sole residence for 3 years, - how many months? I moved to London for work and only use the house occasionally. did you rent it out during that time? My Mortgage will be fully paid in a few months and I am hoping to sell it then as I am intending on moving to Ireland, I want to pay the CGT owed but it seems like a minefield. At the moment I just want a rough estimate so I can make plans.
    I bought the house for 45K in 1993 - what were buying costs (eg mortgage application fee, solicitors costs)
    Market value is now around 250K - what are selling costs (solicitors, EA fee)
    I have owned it for 25 years - how many months?
    And I earn 43K (If this is relevant?)

    My thoughts are its about 40k owed but I'm pretty sure that is not correct.

    Thanks in advance

    You need to give dates. 00ec25 has broken down the calculation for you based on the info you've given but you need to confirm
    1) how many months you've owned it
    2) how many months you've lived there
    3) how many months you let the house to tenants (if any) excluding the last 18months of ownership.
    4) Buying/selling costs
    5) Are you selling any other investments this tax year?
  • purdyoaten2purdyoaten2 Forumite
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    And were there any capital improvements in the 22 years?
  • edited 5 August 2018 at 6:04PM
    sean07687sean07687 Forumite
    4 posts
    edited 5 August 2018 at 6:04PM
    Hi thanks for the response, 00ec25

    I kept the property because I wanted somewhere to live near my family when I was not in London? Is that relevant to the question I asked?

    I wanted to keep my house as an investment while I rent a property in London, the selling price of the house has gone up from 45K to £250K..... I know literally nothing about financial matters, hence the question, yet it seems to me that it was a good idea to keep the property?
  • purdyoaten2

    Could of, would of, should of...... AAAAAAAAArgh,

    Why do you post that? It's so rude.

    I asked a question and explained at the time that I know nothing of financial matters, it seems to me that this website can often be a forum for people to put down other people simply because they do not have knowledge, I thought the point of Forms was to help people, who are in need of advice, not be damn sarcastic to them, I explained I knew very little about that subject and I also asked people to be 'kind' because of this. I wanted HELP, not sarcasm...

    Yes I have made improvements, I have installed:

    Gas boiler and central heating, £3,000

    Double glazing, £2,000

    Wooden floors £,2000

    New kitchen £1500

    New batroom £1500

    Why could not just say, "Sean have you made improvements to the house as this affects the calculation."

    Would that not have been more polite?
  • Thank you saajan_12, I don't have that information to hand I'm afraid but no I have not rented to anyone else, it has been a bolt hole for me when I needed one.... Thanks though I will try to find these matters out.
  • purdyoaten2purdyoaten2 Forumite
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    00ec25 wrote: »
    WOW

    Wow indeed!
  • Hi guys
    We are looking to sell our property and by doing some research and info above I think we have worked out the CGT we will have to pay approximately. But I was hoping someone could please look at our calculations and help us confirm this is correct or give us any other useful advise on anything we have missed
    So:
    We are joint owners
    We brought our house on Nov 30th 2006 - total costs* £300,000

    *cost of house, stamp duty, legal costs, improvements (double glazing, new bathroom, damproofing so it’s sell-able, kitchen costs, new doors – hope these are all allowable?)

    We are looking to sell by Nov 29th 2018 - approx £500,000

    Gain: £200,000

    Total: 12 years

    We lived at the property for the first 6 years and rented it out for the next 6 years
    Private Residence Relief (PRR):
    6 years + 1.5 years (last 18 months)
    7.5 years / 12 years = 62.5% so PRR = £125,000 (200,000 gain x 62.5%)

    Remaining £75,000 Gain LESS:

    Letting Relief = £40,000 is the lowest in our case

    = £35,000

    LESS: Annual Exemption of £23,400 ( £11,700 x 2ppl ; joint owners )

    = £11,600 x 18%

    = CGT liability of £2,088 - ?
  • SDLT_GeekSDLT_Geek Forumite
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    Not quite my field (it is not SDLT) but it might be the case that the maximum of £40,000 for letting relief is per person, not per property.
  • Keep_pedallingKeep_pedalling Forumite
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    You cannot offset any of the improvements mentioned above in your calculations, unless by new bathroom you mean adding a bathroom rather than refurbishing an existing one.
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