CGT Implications of new Tax Rules from 2020!!

torrontes

Hi People,

New to this marvellous forum of helpers. I have recently learned of the huge 2020 tax changes (CGT in this case) which will really hit people when selling a rented property which used to be main residence.

I have put a table together based on my understanding of the situation now, and if selling after april 2020.

Is any more wise soul able to advise if my calc/understanding is correct? Ive seen a lot of incorrect advice out there so hopefully this is simple enough to maybe help others too.

Before/40k.allowance.removed.in.APRIL2020
purchase ........£167,500.00
sell..................£245,000.00
gain ...............£77,500.00
PPR(months).resident..............................................................92
Total-resident.inc.18.months final-18-month-allowance........110
total.months.owned.................................................................144

%.=................................110/144..........................................76.39%
%.exempt (76.3%.of.£77,500)........................................£59,201.39

taxable (77,500-59,201)..................................................£18,298.61
minus.yearly.allowance £12000........................................£6,298.61
buy and sell costs
Minus.40000 40,000.Lettings-relief................................-£33,701.39
tax.due= ..........................................................................-£9,436.39
..NO.CGT.DUE so no need to add buy/sell costs


After 40k allowance removed in APRIL 2020 ..

..........................................................................................Now..........................in..5..years
purchase............................................................................£167,500................£167,500.00
sell ...................................................................................£245,000..................£265,000.00
gain....................................................................................£77,500...................£97,500.00
............................................................................................92..............................92
Total-resident.inc.9.months....9.MONTHS.allowance........101............................101
total.months.owned..........................................................144............................204

%.=..101/204......................................................................70.14%......................49.51%
%.exempt......(49.5%.of.97,500)......................................£54,357.64................£48,272.06

taxable.............................................................................£23,142.36................£49,227.94
minus.yearly.allowance.....1200........................................£11,142.36...............£37,227.94
buy&sell.costs.estimate...................................................£6,000.00..................£6,000.00
[STRIKE]40000............[/STRIKE]............................................................n/a............................n/a

CGT(exc.purch/sales.costs).....(11,142*0.28)...................£3,119.86................£10,423.82***

CGT.using.6k.for.purchase.....(5,142*0.28)......................£1,439.86................£8,743.82
and.sales.costs

***-Further.reduction.after.applying.purchase.and.sale.costs!

Many thanks,

T

00ec25

the annual exempt amount is deducted from the net taxable gain, so in your letting relief example you have it listed in the wrong order, it should be last and therefore it is that which is unused, not the letting relief, as that is used in full to get you to £0 taxable gain. Therefore leaving the allowance untouched and thus available for other gains if you have them

buying and selling costs reduce the size of the gain, they do not reduce the amount of tax. Your maths is wrong doing it the way you show it as the lower gross gain impacts the PRR, it does not feed direct to the bottom line net gain value

now = net gain after allowance 11,142.36 (3.119.86 @ 28%) ,
now incl costs = net gain after allowance 9,350.69 (2,618.19 @ 28%)
5 years no costs 37.227.94 (10,423.82 @ 28%)
5 years w costs 34,198.53 (9,575.59 @ 28%)

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

torrontes

Hi,

Thanks.for.the.quick.reply.

Maybe,being.thick(just had flu!!) but cant quite get how you arrive at 9,350.69? Seems c.6k costs only reduces tax by c.500 & c.850 for the 5 yr projection... ?

cheers,

T

Crashy_Time

https://www.propertytribes.com/new-cgt-rules-coming-into-effect-april-2020-t-127642784-post-409323.html

torrontes

Hi.00ec25,
Thanks again... I,have rearranged my maths and now get the exact numbers youve stated. However, to get you numbers for including allowances, the only way i can do it is by using the 6k expenses to reduce the 77,500 to 71,500 for the purpose of calculating the %gain.....and then using it again, alongside the 12k allowance to give a net gain of 59,500
it looks.like.this;
..........................................after.04.2020............5.years.time
77,500-6000.........=............£71,500.00..............£91,500.00
71,500@70.14%...=............£50,149.31..............£45,301.47
59,500-50.149.31...=..........£9,350.69................£34,198.53
9,350.69@28%.........=........£2,618.19................£9,575.59

Is this actually how it works? really appreciate your input.

best regards,

T

Tom99

torrontes wrote: »

Hi.00ec25,
Thanks again... I,have rearranged my maths and now get the exact numbers youve stated. However, to get you numbers for including allowances, the only way i can do it is by using the 6k expenses to reduce the 77,500 to 71,500 for the purpose of calculating the %gain.....and then using it again, alongside the 12k allowance to give a net gain of 59,500
it looks.like.this;
..........................................after.04.2020............5.years.time
77,500-6000.........=............£71,500.00..............£91,500.00
71,500@70.14%...=............£50,149.31..............£45,301.47
59,500-50.149.31...=..........£9,350.69................£34,198.53
9,350.69@28%.........=........£2,618.19................£9,575.59

Is this actually how it works? really appreciate your input.
best regards,T

Try:
....................................................after.04.2020.............5.years.time
A: 77.5 or 97.5 -6............................£71,500.00..............£91,500.00
B: * 101/144 or 101/204..................£50,149.31..............£45,301.47
C: Taxable gain A-B.........................£21,350.69..............£46,198.43
Less £12,000 allowance................£9,350.69..............£34,198.43
E: Tax at 28%.....................................£2,618.19................£9,575.56

00ec25

torrontes wrote: »

Is this actually how it works? really appreciate your input.

yes it is

what did you not understand in the link in post #2 ?

Toms shows my workings above, no point repeating them

torrontes

tail end of flu and feeling under pressure to make a decision! Then the way i made it work seemed bizarre. Yep, toms working helped show what is probably the correct way.

happy christmas!

torrontes

cheers Tom...makes a little more sense now! Looked bizarre the way id made it work!

cheers

T