buy to capital gains tax

paul4861

hi guys
if a house was bought for 80.000 sold for 110.000 with 15.000 downpayment
with a mortgage of 72.000 with 6.000 added for improvements
what would be capital gains payment .
thanks for your help :T

moneysavinmonkey

you have given us the wrong information there.. it doesn't matter about what the mortgage and 'down payment' were..

what kind of property is it ie your home, used to be your home but now a BTL, bought as a BTL?

When are you planning on selling? or have you already sold?

are you an individual, a couple or trading as a company?

do you have receipts for these improvements?

paul4861

sorry for that
it is a buy to let i am renting out to a member of my family
it is not my family home
i am an individual but am self employed
i am thinking of selling quite soon and was bought as buy to let
thanks

dunstonh

bought for 80k and sold for 110k gives you a £30k gain.

You can deduct costs of purchase and disposal in that as well as taper relief if the sale takes place in this tax year. However, from next tax year there will be no taper relief (subject to budget confirmation) but the CGT rate will reduce to a flat 18%.

The improvements would depend on what they were. Some would possibly be offset against your income tax whilst others could be offset against CGT. It depends on what type of improvements they were.

moneysavinmonkey

If you have been renting it out as a BTL then you are probably best getting some advice from an accountant as along with the capital gains calculation you'll have to check if you owe anything in income tax.
Capital gains tax rules are supposed to be changing in april as well but i think this is being opposed so it's not definite what will happen. At the moment the rules take into account how long you have owned the property, with the amount of tax due reducing each year you hold the property, from April they are scrapping this just having one lower flat rate.

The capital gains tax calculation after april 2008 will be:
( sold price - purchase price - annual capital gains allowance ) x 0.18

You don't say how long you have owned the property (my fault i forgot to ask that question!) which may affect the calculation but assuming you sold it after april 08 you will likely be looking at about £4k.

As I said if you have done improvements and being accepting rent then this will have to be figured in as well.

silvercar

If all those improvements are real improvements rather than repair and replacements then they should be allowable.

So you have a gain of 30k less 6k improvements= 24k. Take off buying costs and selling costs (~3k) = 21k.

You have a CGT allowance of 9.2k in the current year, reducing your gain to 11.8k. If you have owned it for less than 3 years there will be no taper allowance, so the 11.8k will attract CGT at your marginal rate.

At 40% this would be £4,720, included on your tax return and payable by the end of January following the tax year end. So sell now and pay Jan 2009.

If you exchange after 6 April, the new CGT rules mean a flat rate of CGT of 18% and the CGT increases to 9.4k; so your liability reduces to 11.6k and the bill will be £2,088 payable by January 2010.