CGT and income tax on house sale

toffeeman2

Hello,

I've recently sold a second home which I had been letting out. I understand I will have to pay CGT based on the difference between price at which I purchased the house and the price at which I sold it. However, I'm confused whether the profit I made on selling the house (~£100K) will also be subject to income tax when I file my tax return. I guess this additional income will mean I will be push into the higher tax bands and this 100K will be taxed so I will pay the CGT plus additional income tax. Is that correct?
Thanks for any help,
Jeff

00ec25

toffeeman2 wrote: »

Is that correct?

no that is incorrect

read step 5
https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

toffeeman2

Thanks; given the proceeds of the sale were £150K, the Gross Gain was £50K on which I would be liable for CGT (minus PRR, LR and personal allowance). I assume then that the remaining £100K would be considered separately and be liable for income tax?

antrobus

toffeeman2 wrote: »

Thanks; given the proceeds of the sale were £150K, the Gross Gain was £50K on which I would be liable for CGT (minus PRR, LR and personal allowance). I assume then that the remaining £100K would be considered separately and be liable for income tax?

No. And again, NO.

toffeeman2

OK, thanks - I apologise for being slow. I'm trying to get a rough estimate of how much tax I will need to pay next April. I would like to use the proceeds of this sale to pay off the mortgage on my primary residence ASAP but I don't want to do so and then leave myself short and unable to pay my 2018-2019 tax bill.
My annual salary is approx. £55K so, with the proceeds of the house sale, will give me a total income of £205K. £50K will be taxed under CGT so the remaining £155K will be subject to income tax as per the 20%/40% and 45% tax rates so my total income tax bill would be ~£55K. Is that a reasonable assumption?

Keep_pedalling

toffeeman2 wrote: »

OK, thanks - I apologise for being slow. I'm trying to get a rough estimate of how much tax I will need to pay next April. I would like to use the proceeds of this sale to pay off the mortgage on my primary residence ASAP but I don't want to do so and then leave myself short and unable to pay my 2018-2019 tax bill.
My annual salary is approx. £55K so, with the proceeds of the house sale, will give me a total income of £205K. £50K will be taxed under CGT so the remaining £155K will be subject to income tax as per the 20%/40% and 45% tax rates so my total income tax bill would be ~£55K. Is that a reasonable assumption?

No, your profit, less your annual allowance, will be taxed at the higher CGT rate of 28%. The rest of it is not subject to any taxes as it is basically cashing in your original asset.

This assumes you have never lived in the property

getmore4less

toffeeman2 wrote: »

OK, thanks - I apologise for being slow. I'm trying to get a rough estimate of how much tax I will need to pay next April. I would like to use the proceeds of this sale to pay off the mortgage on my primary residence ASAP but I don't want to do so and then leave myself short and unable to pay my 2018-2019 tax bill.
My annual salary is approx. £55K so, with the proceeds of the house sale, will give me a total income of £205K. £50K will be taxed under CGT so the remaining £155K will be subject to income tax as per the 20%/40% and 45% tax rates so my total income tax bill would be ~£55K. Is that a reasonable assumption?

Stop calling it income

Selling stuff you own is not income.

BoGoF

And the CGT will not be payable until 31 January 2020......assuming by 'recently sold' you mean this tax year.

00ec25

getmore4less wrote: »

Stop calling it income

Selling stuff you own is not income.

please learn about CGT before making such comments, the rate at which CGT is payable is based on the "TOTAL INCOME" for the year, that is taxable income + CGT net gain and determines whether the rate is 18% or 28% as explained in the link at post #2

TOTAL INCOME is the correct wording in that context

getmore4less

00ec25 wrote: »

please learn about CGT before making such comments, the rate at which CGT is payable is based on the "TOTAL INCOME" for the year, that is taxable income + CGT net gain and determines whether the rate is 18% or 28% as explained in the link at post #2

TOTAL INCOME is the correct wording in that context

The OP is talking about the proceeds of the house being all income at 20%,40%,45% rates.

Totally different context to the CGT one.

[Deleted User]

toffeeman2 wrote: »

OK, thanks - I apologise for being slow. I'm trying to get a rough estimate of how much tax I will need to pay next April. I would like to use the proceeds of this sale to pay off the mortgage on my primary residence ASAP but I don't want to do so and then leave myself short and unable to pay my 2018-2019 tax bill.

Your salary is already taxed - I suspect that you want to know how much to pay on the sale of the property.

The answer is £10696 based on:
£50000 profit less allowance £11800 = £38200 @ 28%.
This would be payable on by 31st January 2020.

There is nothing else to pay. You can further reduce the gain by claiming costs of sale such as legal fees, agents fees etc.