Paying Capital gains tax

himalshelat

I have a question about my situation.
I am selling my main residence and buying a new home.
I have lived in my property from Dec 2006 - Dec 2012 and then from June 2019. I was living abroad in the gap years and the property was rented for approx. 5 years of that time. Will I have to pay Capital gains tax? If yes. How much will it be? The property price has gone up by 157000£. 
I am also looking at the option of selling and then buying after 3/4 months. Will this change the situation in any way?

AdrianC

The exact numbers are worked out on the sale date and price. But roughly... you have owned the place for 170 months, and it has not been your residence for 79 months. 9 month allowance is removed from that "non resident" period.

So you pay CGT on 70/170ths of the increase - 41% x £157k = £64,600. Assuming you have no other taxable gains in the tax year, you get a £12,300 allowance - so you actually pay 28% tax (assuming you're a basic rate tax payer) on £52,300 = £14.650.

CGT is only worked on the sale, what you later do is irrelevant.

macman

Remember that you can deduct the purchase costs (incl. stamp duty) and sale costs from the gain, plus any improvement costs (not maintenance costs). The gain is added to your taxable income and that determines whether you pay 18% or 28%: basic rate taxpayers pay the lower rate. Based on AdrianC's figures, you''ll be on the higher rate (£50k upwards), unless you have no other taxable income in the year of disposal.
There is a possibility that CGT rates will rise at the budget, so, if feasible, I'd aim to complete before 3rd March.

AdrianC

Yes - good point on the banding being the total income, so that alone pushing it over.

saajan_12

himalshelat said:

I have a question about my situation.
I am selling my main residence and buying a new home.
I have lived in my property from Dec 2006 - Dec 2012 and then from June 2019. I was living abroad in the gap years and the property was rented for approx. 5 years of that time. Will I have to pay Capital gains tax? If yes. How much will it be? The property price has gone up by 157000£. 
I am also looking at the option of selling and then buying after 3/4 months. Will this change the situation in any way?

Why did you move abroad? There may be certain exceptions which allow you to retain your resident status. 
On the face of it, 
* Gain = 157k less selling costs (agents, solicitors etc) so call it £150k. 
* Ownership = 170 months 
* Residence = 72 months initially + 20 months recently = 92. You're deemed to live there for the last 9 months, but that has no effect here as you actually were living there. 
-> Private Residence Relief for 92/170 = 54%
* Annual allowance £12.3k for the year that you realise the gain, ie sell it. 
Taxable gain = 150k - (54% x 150k) - 12.3k = £56.5k

The tax rate on this is 18% or 28% depending on how much of this gain falls under the higher tax bracket threshold, after your other income. At 28%, that would be £15.8k CGT. 

AdrianC said:

The exact numbers are worked out on the sale date and price. But roughly... you have owned the place for 170 months, and it has not been your residence for 79 months. 9 month allowance is removed from that "non resident" period.

Incorrect, the 9 months is only a deemed resident period for the last 9 months of ownership. OP was actually in residence at this time, so this is already accounted for in the period of residence. 

greatcrested

AdrianC said:

...
So you pay CGT on 70/170ths of the increase - 41% x £157k = £64,600. Assuming you have no other taxable gains in the tax year, you get a £12,300 allowance - so you actually pay 28% tax (assuming you're a basic rate tax payer) on £52,300 = £14.650.

18% for basic rate tax payer.

28% for higher rate tax payer.