CGT Private Residence Relief and Letting Relief HELP

StephNotts

Hello

I thought I had cracked this but HMRC web site says "no" so I hope someone here can help me!

We've just sold a house we bought in 2002, lived in until June 2011 and sold in January 2018. The total gain using the capital gains tax calculator on the HMRC website is £133,347 and the Private Residence relief assuming gain divided by number of months we owned it (192) = £695 x 132 which includes the extra 18 months you get. Which comes to £91,676 PR. I'm almost sure that's right. We were accidental landlords and the house was rented out (or rentable, no one in it last 4.5 months but think that's our problem). According to the HMRC website guidelines which I've read five times we're also eligible for Lettings Relief because the house was let out whilst we owned it. Which I don't understand but not going to look a Gift Horse in the Mouth. It was rented for 6.5 years/16 years we owned it x gross profit of £133,347 = £54,172. So the lower amount of that would be £40,000? When I enter that onto the calculator it comes out at zero. Which was a surprise. So a) am I right that it's zero and if so why won't the HMRC website let me enter that at zero? and is it correct that I'm eligible to claim both PRR and LR? Really thought I'd cracked it and now really not sure at all and HMRC website agrees!

Any help hugely appreciated

Steph

00ec25

put your dates and amounts through this step by step guide and then show your workings in another post and one of us will tell you if you have done it correctly:

http://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

bear in mind since you say "we" you split the gain between each of you at step 1 and then do the rest using per individual person, in other words for a jointly owned property, each owner gets PRR and LR provided each person lived in it as their main home whilst they were an owner of it. If a person did not, then that person can't claim either PRR or LR at all

StephNotts

Thank you this is very helpful. The house was only in my name so only one set of allowance.

So Gross profit is £133,347.
9.5 years living there plus 18 months comes to 11 so it's £133,347 x 11/16 which is £91,676 PPN

Then rented for 6 years but presume total can't be more than the total years the house when the 18 months is included is owned so assumed 5 years is £133,347 x 5/16 which gives £41,671. However, it was empty for 4.5 months so do I take that off? giving 4.5/16 £37,503? I'll assume so.

In which case for LR

PPR £91,676
Gross gain during rental £37,503
or £40,000

So £37503 + £91,676 = £129,180
Plus CGT allowance which is £11.300 giving zero?

Am I doing the right thing with the 18 months? Should I reduce the rental period more. The house was bought and sold in January exactly 16 years apart. Is this correct? If it is can anyone tell me why CGT return won't let enter zero?

Many thanks

00ec25

StephNotts wrote: »

Am I doing the right thing with the 18 months? Should I reduce the rental period more. The house was bought and sold in January exactly 16 years apart. Is this correct? If it is can anyone tell me why CGT return won't let enter zero?

please advise how I can reword my post so that people do what it says?

Jan 2002 - Jan 2018 is 193 months
Jan 2002 - June 2011 is 113 months (assuming you mean you moved out before 1 June as "until June" is imprecise, if you moved out in june then it is 114 months and the let period would be 61 not 62)

PRR 133,347 x (113+18)/193 = 90,510

LR: LOWEST
a) 96,510
b) 133347 x 62/193 = 42836
c) 40,000

net gain after relief 133,347 - 96,510 - 40,000 = 2,836
deduct personal allowance 11,300 = ZERO net taxable gain
balance of personal allowance remaining 8,464

you state the 4.5 months falls within the final 18 months so how come you do not understand the sentence in step 2: "the final 18 months of the ownership of the property irrespective of whether it was lived in, let, or remained empty for that final period"

StephNotts

its exactly 16 years in total - 192 months?

00ec25

StephNotts wrote: »

its exactly 16 years in total - 192 months?

we are both wrong, i read it as Jan 2017 so am 12 out and have thus amended the post above

you have forgotten that as you purchased in jan and sold in jan then that is 16 years + 1 month and is a good example of why you cannot use whole years in the calculation

16 x 12 +1 = total 193

2512Steve

Originally posted by 00ec25:
net gain after relief 133,347 - 96,510 - 40,000 = 2,836
deduct personal allowance 11,300 = ZERO net taxable gain
balance of personal allowance remaining 8,464


Have I noticed a possible spanner in the works or confusing CGT allowance with Personal Tax Allowance? The calculation above by 00ec25 deducts StephNotts' Personal Tax Allowance but I have not seen any mention of whether StephNotts has a job and his/her Personal Tax Allowance has been completely or partially used against his/her income; surely this will affect the CGT liability if this is the case. :undecided

System

2512Steve wrote: »

Originally posted by 00ec25:
net gain after relief 133,347 - 96,510 - 40,000 = 2,836
deduct personal allowance 11,300 = ZERO net taxable gain
balance of personal allowance remaining 8,464


Have I noticed a possible spanner in the works or confusing CGT allowance with Personal Tax Allowance? The calculation above by 00ec25 deducts StephNotts' Personal Tax Allowance but I have not seen any mention of whether StephNotts has a job and his/her Personal Tax Allowance has been completely or partially used against his/her income; surely this will affect the CGT liability if this is the case. :undecided

No. The personal allowance 00ec25 is referring to is the CGT tax-free allowance of £11,300. Tax on capital gains has nothing to do with income tax (until you get into the question of what % to apply to any chargeable gains, but that's not relevant here so won't go into it).

00ec25

2512Steve wrote: »

Have I noticed a possible spanner in the works or confusing CGT allowance with Personal Tax Allowance?

no, you have either misread or don't know the difference between income tax (£11,500 17/18) and CGT allowances (£11,300 17/18)

do some reading?

https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2017-18/tax-and-tax-credit-rates-and-thresholds-for-2017-18

https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

the basics of CGT explained

x-caitlin-x wrote: »

No. The personal allowance 00ec25 is referring to is the CGT tax-free allowance of £11,300. Tax on capital gains has nothing to do with income tax (until you get into the question of what % to apply to any chargeable gains, but that's not relevant here so won't go into it).

thanks