Capital gains tax calculation

Emmsy1976

Need some help please, the Gov website is so complicated. I bought my flat on my own in June 2011 for £223k. I lived in it as my main home until March 2018 when I bought a second property and moved into second property, renting out first property. I sold the first property on 19 March 2021 for £424k. How much much CGT do I pay/ calculation?
thanks 

Jeremy535897

You owned property 1 for 9 years and 9 months (117 months). You lived in it as your main residence for 6 years and 9 months (81 months). The last 9 months are exempt, so the exempt period is 81+9 = 90 months out of a total of 117 months.

Your gain was £424,000 less £223,000 = £201,000. 90/117 is exempt, so the chargeable gain is £201,000 x 27/117 = £46,385. Assuming no other gains in the year, the taxable gain is £46,385 less £12,300 annual exemption = £34,085. Depending on your income, the rate will be 18%, 28% or a combination of the two. See: https://www.gov.uk/capital-gains-tax/rates

If the figures you quoted don't include costs of purchase or sale (legal fees, estate agent fees, stamp duty), you can reduce the gross gain of £201,000 by these amounts.

You should report the gain and pay the tax within 30 days of completion. If that was on 19 March 2021, you need to get on with it. See:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

[Deleted User]

You owned the flat for 117 months. 
It was your main residence for 81 months and you can add another 9 months as you lived in it at some point. 90/117 of the gain is, therefore, exempt.

Gain 201000 less exempt 154615 leaves 46385. Take off your annual exemption and 34085 is chargeable at 18%, 28% or a combination of the two depending on your other income. You can also deduct legal costs associated with the purchase and sale.

You have six more days to both declare the gain and pay the tax thereon (18th April)

https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

Jeremy535897

Great minds...

[Deleted User]

Jeremy535897 said:

Great minds...

Better typist....

Black_Cat2

I too find the website a little confusing. Would you mind clarifying... If you've made a £30,000 gain after all allowances and are a basic tax payer on a salary of £25,000 does this mean you pay 28% on the gain? 

Jeremy535897

If you have income of £25,000 in 2021/22, you deduct £12,570 personal allowance and pay 20% tax on £12,430 (in England and Wales). That leaves £50,270 - £25,000 = £25,270 basic rate band available against capital gains. If you make a gain on residential property of £30,000 after all allowances, you would pay capital gains tax at 18% on £25,270, and capital gains tax at 28% on £4,730.

[Deleted User]

Jeremy535897 said:

If you have income of £25,000 in 2021/22, you deduct £12,570 personal allowance and pay 20% tax on £12,430 (in England and Wales). That leaves £50,270 - £25,000 = £25,270 basic rate band available against capital gains. If you make a gain on residential property of £30,000 after all allowances, you would pay capital gains tax at 18% on £25,270, and capital gains tax at 28% on £4,730.

For 2020/21, in that example, the £30000 gain would be £25000 @18% and £5000 at 28%. Sad to see the departure of those nice round figures of 12500 and 50000.

Black_Cat2

Thanks both, silly question alert... If you don't have an income at all will you still be entitled to deduct the £12,570 personal allowance? 

Jeremy535897

Black_Cat2 said:

Thanks both, silly question alert... If you don't have an income at all will you still be entitled to deduct the £12,570 personal allowance? 

No. If you had no income, and a residential property gain of £30,000 after deducting the capital gains tax exemption, you would pay 18% on the £30,000.

macman

If you have a capital gain of £30K, then you clearly do have an income in that tax year, albeit in a one-off form.
In order to calculate the rate of CGT charged, the capital gain is added to your net income.