Rental House Sale - Validate tax due?

MaxiRobriguez

Can someone validate this for me please?

Bought a house in October 2009 for £106,500.
Converted to rental in October 2015.
Sold in October 2018 for £145,000.

9 years ownership in total, so 108 months, 73 of which I lived in the property. Account for the 18 months at end of tenancy and it comes to:

Private resident relief (38500 * (73/(108-18))) = £31,227.
Gain attributable to letting (38500 * (35/108-18))) = £14,972.

No cap gains allowance used in 2018/2019 tax year, so take £14,972 (lowest) and subtract allowance (£11,700) for total cap gains due of £3,272.

18% of that (basic rate tax payer) for final cap gains due of £589.

Am I doing my sums right or have I missed anything?

ceh209

MaxiRobriguez wrote: »

Am I doing my sums right or have I missed anything?

I understand the PPR calculation to be 38500 * ((73+18)/108) = 32,440

And the gain attributable to letting is 38500 * ((35-18)/(108-18)) = 7,272 (I'm excluding the last 18 months because you already have PPR on that, you can't have double relief)

Together those come to more than the gain of 38,500 so your taxable gain is 0.

It's been a while since I've done these so if someone could confirm my understanding that would be great!

yorkiechick

The PPR would be 91/108 * 38500 as you add on the last 18 months to the 73 months it was lived in.
This would give a figure of PPR of £32,439.

Giving you a gain of 38500-32439 = £6,061 which is under the CGT allowance anyway so you wouldn't need the lettings relief. So overall you won't have CGT to pay.

MaxiRobriguez

Thank you both.

I assumed that when calculating tax due it was to use one of PPR OR the gain attributable to letting (whichever was lower), and subsequently sum that from the overall gain.

So I was assuming I couldn't use the PRR element.

yorkiechick

You can claim both if needed :dance:

00ec25

the calculations are explained here:
https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

PPR: 38500 * ((73+18)/108) = 32,440
LR is lowest of:
a) 32,440 ie PRR
b) 38500 * ((108-73-18)/108) = 6,060 ie gain in let period
c) 40,000 the max LR allowed

sense check: 32,440 + 6060 = 38,500
(it can never add up to more than the gain you started with)

net taxable gain: 38,500 - 32,4400 - 6060 = 0
no tax to be paid

00ec25

yorkiechick wrote: »

Giving you a gain of 38500-32439 = £6,061 which is under the CGT allowance anyway so you wouldn't need the lettings relief. So overall you won't have CGT to pay.

from a tax planning & advice point of view you should not ignore LR. Whilst in this case the end result is the same, no tax, you do not willingly forgo the allowance if you don't need to use it.

In this instance, by claiming LR you do not need to touch the annual exempt amount (the so called "CGT personal allowance") which is therefore still available in case of other taxable gains during that tax year (eg. share sales etc)

MaxiRobriguez

00ec25 wrote: »

from a tax planning & advice point of view you should not ignore LR. Whilst in this case the end result is the same, no tax, you do not willingly forgo the allowance if you don't need to use it.

In this instance, by claiming LR you do not need to touch the annual exempt amount (the so called "CGT personal allowance") which is therefore still available in case of other taxable gains during that tax year (eg. share sales etc)

I won't be disposing of any other assets but this is good advice for the future, thank you.