Selling my House - as a Landlord

PierremontQuaker03

I am thinking of selling my house which I rent out at the moment. I became an accidental landlord a few years ago but I am thinking of cashing in, in the next tax year. I know (as it is in both myself and my wife's name) that we can claim 12.3k each in capital allowances.  The house cost me 64k ( I was the only person on the mortgage at that time), and now it is worth approx £140k.  I put my wife on the deeds and mortgage a few years ago with a view to selling and maximising both of our capital gains. So looking at a 50k profit after capital gains, I will pay 20% tax on my half (I slightly go over to the 40% tax bracket with my annual bonus) and my wife will pay 10% tax on her half. Does this sound correct?

2bFrank

It will be classed as Capital Gains Tax, (think its 28% on a house). You get a I think a £12k allowance, so it will be the profit minus exemption. So very roughly,

Cost £50k
Sold: £140k
Total £90k Profit

Split £45k - Allowance £12k = £33k
28% of £33k = £9,240 Each

However your partner might only have to pay 18% if they are on the lower rate and the profit doesnt push her up to the higher rate.

2bFrank

Sorry just seen the house costs £64k rather than £50k, you will need to change figures but will be less CGT to pay.

newsgroupmonkey_

I'm not sure where you got all those costs from 2bFrank.

He bought it for £64k and sold for £140k.

Profit is £76k.

In addition, you get some relief if you lived in it (number of months lived divided by number of months owned).

Bear in mind any costs of buying or selling can be removed too.

It's quite complicated, because I would think that your partner only pays CGT since they were added.

2bFrank

yeah for some reason I thought they bought for £50k, I did comment a little lower. You can also claim legal costs etc from the profit. as I mentioned I put those numbers as a very rough estimate and prob the maximum you would pay.

canaldumidi

You'll pay Capital Gains Tax based on the full increase in value between date of puchase and date you added your wife.

You'll also pay CGT based on half the increase in value between the date you added your wife and the date of sale.

Your wife will pay CGT based on half the increase in value between the date you added your wife and the date of sale.

You can deduct certain allowances (eg sale costs, capital expenses), and you'll have you annual personal allowance (assuming no CGs elsewhere like selling shares).

Personal allowance for 2021-2022 is £12,300 each. See

https://www.gov.uk/capital-gains-tax/allowances

CGT rates are either 28% or 18% depending on income. See

https://www.gov.uk/capital-gains-tax/rates

PierremontQuaker03

newsgroupmonkey_ said:

I'm not sure where you got all those costs from 2bFrank.

He bought it for £64k and sold for £140k.

Profit is £76k.

In addition, you get some relief if you lived in it (number of months lived divided by number of months owned).

Bear in mind any costs of buying or selling can be removed too.

It's quite complicated, because I would think that your partner only pays CGT since they were added.

I lived in the house for approx 12 years

canaldumidi

PierremontQuaker03 said:

newsgroupmonkey_ said:

I'm not sure where you got all those costs from 2bFrank.

He bought it for £64k and sold for £140k.

Profit is £76k.

In addition, you get some relief if you lived in it (number of months lived divided by number of months owned).

Bear in mind any costs of buying or selling can be removed too.

It's quite complicated, because I would think that your partner only pays CGT since they were added.

I lived in the house for approx 12 years

In that case you get allowance for that too.  Try the calculator on the gov site, or speak to an accountant. Or research the precise rules and do some semi-complex maths.

ProDave

If you lived in it for 12 years then let it "a few years ago" then you are only liable fort CGT on the period you let it.  So lets guess "a few years" means 4 years, then roughly you will be liable to pay CGT on 1/4 of the profit.

So the taxable gain might only be £19K and with 2 lots of CGT allowance, that could be nothing at all to pay as long as you have not made other capital gains ii the period.