Capital Gains Tax with Partial Residence Relief on selling property

Irwinsing

With a property owned a total of 19 years (13 as main residence, then remarried so moved in with husband, and let mine for 6 years.). If property sold with £100,000 gross profit is the correct calculation to assess CGT.    Divide £100k by 19 = £5,263 (average yearly gain).  13 years eligible for no tax (as main home), then 6 x £5263 = £31,578 being capital gain.  But this figure can be reduced with reliefs - firstly  CGT allowance of £12,300 so £19,278 and further reliefs can be deducted for any capital improvement expenditure, plus buying and selling costs (stamp duty, estate agents, solicitor fees) .  Say another £10k meaning the taxable gain would be £9,278 - this figure then added to your income and all taxed at 20% (if earnings under £50k pa)

Can anyone confirm this is the correct computation.  Or advise a correct calculation thank you.

[Deleted User]

A few errors in the methodology and facts.

If the ‘gross’ profit is £100000, it is from that that you deduct buying and selling costs. I will go with your £10000 and assume that the capital costs are allowable. We now have £90000. 
Your total ownership, in months, is 228. It was your main residence for 156 of these and you also can add an additional 9 months as it was your main residence at some point. 165/228 of the 90000 is thus exempt which equates to 65131 leaving 24869 chargeable. You can deduct the 12300 allowance leaving 12569 chargeable at 18% (not 20%) or 28% as appropriate.

Gains must be reported and tax paid within 30 days of exchange of contracts.

Jeremy535897

Not far wrong. You can add 9 months to the exempt part and deduct 9 months from the chargeable part (last 9 months of ownership exempt in this case), so the taxable gain is £5,263 x 5.25 = £27,631. Any reliefs such as those you describe  (buying and selling costs, enhancement expenditure) reduce the gross gain of £100,000, so you will only receive the benefit of 5.25/19 of them. The annual exemption does reduce the chargeable gain after reliefs as you describe (assuming not used elsewhere). Normally you do the calculation in months rather than years.

Enhancement expenditure is complex. See:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15180

For how to work out the tax rate see:
https://www.gov.uk/capital-gains-tax/rates

You will have to report and pay any tax within 30 days of completion, unless no tax is payable. See:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

Irwinsing

well well thank you so much. I am actually a bit peeved cos I never bought with intention to let and make a profit (it was my main residence 13 years). On surprisingly remarrying we did prenups clearly stating our financial assets were separate and to be protected for our children (husband x 4, and me 2).  Also to protect for my future if husband predeceases me as I would have to move out our marital home (given a little time to do that of course). Hence I feel I will be financially penalised if I sell (to re-buy for reasons I wont bore you with).  Almost feel husband should leave the CGT taxed amount in his Will (not an easy conversation,,!!!). He thinks I wouldn’t have to declare but being married seems to dictate I will have to.

So just have to consider.

Jeremy535897

Better a profit subject to tax than a loss. HMRC are using sales data to check people are reporting capital gains on properties.

[Deleted User]

Irwinsing said:

well well thank you so much. I am actually a bit peeved cos I never bought with intention to let and make a profit (it was my main residence 13 years). On surprisingly remarrying we did prenups clearly stating our financial assets were separate and to be protected for our children (husband x 4, and me 2).  Also to protect for my future if husband predeceases me as I would have to move out our marital home (given a little time to do that of course). Hence I feel I will be financially penalised if I sell (to re-buy for reasons I wont bore you with).  Almost feel husband should leave the CGT taxed amount in his Will (not an easy conversation,,!!!). He thinks I wouldn’t have to declare but being married seems to dictate I will have to.

So just have to consider.

Valid points but you can hopefully have some consolation in the fact that have made a gain on your ‘investment’ of around 90000 with a tax liability of 2262 or so. 

Irwinsing

True yes I really don’t mind if say upto £3,000 in tax so pleased some suggest that.  I am assuming I would be able to offset a patio I had built as a capital expenditure and also a built in wardrobe.  Thank you again.

Jeremy535897

Any enhancements have to be reflected in the value. The patio is a possibility. The wardrobe is less likely to qualify. See the link in my earlier post.