Capital gains tax question

spdavies

Hi there - looking for some advice on CGT please.

If selling a 2nd property as a development then which bits do i pay the new 18% capital gains tax on (as of April).

For easy maths consider the following scenario
Purchase price 100k
development costs (builders, materials etc) 10k
Estate agents fees 2k
Solicitors and search fees etc 3k
Mortgage fees 1k
Sale price 150k

Do i pay CGT on the full difference between the 150 and 100 or am i allowed to deduct the development costs before applying tax???

I'm sure this is very complicated but a simple overview would be appreciated from you clever people..

silvercar

Do i pay CGT on the full difference between the 150 and 100 or am i allowed to deduct the development costs before applying tax???

You can deduct all the costs you mention, presuming that the mortgage fees are for surveys & arrangement fees rather than interest.

Don't forget your CGT allowance (currently 9,200).

spdavies

oh good thats what i was hoping you'd say.

Will the 9,200 allowance still be around once the reduction to 18% takes place?
Is this per person - i.e. could i share it between my wife and i and get an allowance of 9,200 if the property was jointly owned?

So the only things that don;t count as costs are mortgage repayments then??

I assume that you capture your costs in a self assessment form?

silvercar

Will the 9,200 allowance still be around once the reduction to 18% takes place?

Yes, probably increase slightly.

Is this per person - i.e. could i share it between my wife and i and get an allowance of 9,200 if the property was jointly owned?

£9,200 each if jointly owned.

I assume that you capture your costs in a self assessment form?

Yes, include them in your tax returns for 2008/09 if you exchange contracts after 6/4/08 and pay the tax due by 31/1/10.

As a one off you are looking at the CGT rules. If you start doing this regularly the revenue ccould consider this a trade and expect income tax/ NI payments.