CGT when selling Question

Rogerrabbit777

p00hsticks said:

Rogerrabbit777 said:

p00hsticks said:

Rogerrabbit777 said:

Could you advise on how to work out any potential tax or/and is there a time they could live in the property to avoid it all together? 

Answer to the second question is No, there isn't.
There is a CGT calculator on the gov.uk website here
Tax when you sell your home: Private Residence Relief - GOV.UK (www.gov.uk)

I'm not an expert so I might not have the details totally correct but I think that roughly the calculation goes something like;

A: Capital gain = selling price - price to buy - cost of buying - cost of selling - price of any major improvements
(There are guidelines as to what can be classed as improvements and what is just maintenance). 

You then work out the proportion of time in months that the property was NOT their main residence, plus an allowance of a further nine months. 
B: (Total months owned - total months for which it was your main residence - 9)  / Total months owned  

The CGT liability is then A x  B; each individual owner has an annual CGT allowance which they can use to set against this if not used already. (This tax year it is £6k, reducing to £3k next year).   

Note that any CGT due needs t obe paid within 60 days of the completion of the house sale 

Thank you. Although i find this totally confusing interms of trying to work it out. ive looked on the hmrc link and one of the questions is how much relief are you entitled to? How am i supposed to answer that as im trying to find out  what if any CGT would be due. Would anyone be able to help me interms of working out whether its above their allowance of it would maybe be a few hundred or alot more and something to worry about?

If you can tell us

• what they paid for the house
• what they think it will sell for now
• when (month and year) they bought it
• when (month and year) they  moved out,
• when (month and year) they moved back in
• and when (month and year) they hope to sell it

people will be able to give a rough idea)

Thank you so much thats very kind. 

Paid £57,000 in April 1991. Now roughly sell for £265,000
they moved out in April 2014. Moved back in end of june 2023. Hope to sell by the end of the year or no later than next summer 2024

pumas

e.g.

a Profit from sale 200,000

b Annual income 25270

c Personal tax allowance 12570

d Amount at which higher tax rate payable 50270

e CGT allowance 6,000

f Lived in relief in months 288/396x200,000 = 145454

g 200000-6000 =194000-145454 = 48546 a-e-f

h 50270-25270 = 25000 d-b  = 25000x18% = 4500

i 48546-25270 = 23276 g-b  = 23276x28% = 6517

Total to pay =£11017

If property jointly owned, each owner is responsible  for their share e.g. half, in the above case 

a Profit from sale 100,000

b Annual income 25270

c Personal tax allowance 12570

d Amount at which higher tax rate payable 50270

e CGT allowance 6,000

f Lived in relief in months 288/396x100,000 = 72727

g 100000-6000 =94000-72727 = 21273 a-e-f

h 50270-25270 = 25000 d-b  which is more than g

so 21273x18% = 3829x2 = £7658

Rogerrabbit777

pumas said:

e.g.

a Profit from sale 200,000

b Annual income 25270

c Personal tax allowance 12570

d Amount at which higher tax rate payable 50270

e CGT allowance 6,000

f Lived in relief in months 288/396x200,000 = 145454

g 200000-6000 =194000-145454 = 48546 a-e-f

h 50270-25270 = 25000 d-b  = 25000x18% = 4500

i 48546-25270 = 23276 g-b  = 23276x28% = 6517

Total to pay =£11017

If property jointly owned, each owner is responsible  for their share e.g. half, in the above case 

a Profit from sale 100,000

b Annual income 25270

c Personal tax allowance 12570

d Amount at which higher tax rate payable 50270

e CGT allowance 6,000

f Lived in relief in months 288/396x100,000 = 72727

g 100000-6000 =94000-72727 = 21273 a-e-f

h 50270-25270 = 25000 d-b  which is more than g

so 21273x18% = 3829x2 = £7658

Wow lots of maths there. Thank you.so which figure would they owe? The 11,000 one or the £7k one? The property is jointly owned husband and wife. Am i correct in thinking its only the gain made from approx 2015 as they lived overseas or would that only work if they were still abroad

pumas

What they owe depends! If they each claim relief then in the example above CGT would be 7658. Try plugging you own figures in.
Lived in relief is the no.of months lived there divided by the no.of months owned multiplied by the profit.
Higher income tax and the higher CGT rate apply when after all allowances have been used.
Any gross income is deducted from the higher amount of 50270 and the result is taxed at 18%, the remainder above this is taxed at 28%.
Obviously 2 people both get the £6000 allowance and both incomes(including pesions) allowed.

sheramber

Remember , after 6 April 2024 the CGT allowance drops to £3000 each, instead of £6000

Rogerrabbit777

pumas said:

What they owe depends! If they each claim relief then in the example above CGT would be 7658. Try plugging you own figures in.
Lived in relief is the no.of months lived there divided by the no.of months owned multiplied by the profit.
Higher income tax and the higher CGT rate apply when after all allowances have been used.
Any gross income is deducted from the higher amount of 50270 and the result is taxed at 18%, the remainder above this is taxed at 28%.
Obviously 2 people both get the £6000 allowance and both incomes(including pesions) allowed.

Thanks i had a play around with hmrc site and its coming out at around £9,500. This is probably a stupid question! But those figures are based off one ownership as it asks what your income is for the year etc. Now what, if any difference does it make if its a husband/wife ownership and the wife has very little income ie a tiny state pension. And the figures i put in were based of the husbands larger state  and private pension that then came to the figure of £9,500. Do i need to do it twice and get two separate quotes based on the co ownership of the property imputing each of their own income or will it still add up to the same amount of £9,500 whichever way you do it?

pumas

Do it thrice - single owner(but not applicable, just for comparison, will be more than sum of 2) and for each joint owner assuming half shares, as per examples I gave. 
When the time comes to sell, your solicitor will presumably advise. 

sheramber

Each parties share of the  gain is charged according to their  own tax liability.

it is not one charge but two- one each.

Rogerrabbit777

Thank you all for your comments , ive done it as two seperate caculations and its around £7300 so as posted above. It seems very unfair that people who only own one property and are not speculating are treated the same as developers. The only reason they rented their property was because they could not afford to buy a second one so thought renting and renting would be the best bet. Now they have returned and want to downsize and free up cash as they are O.A.Ps and will be charged over 7k for the privilege! Something they can hardly afford.  The same happened to a relative who was charged the same amount for doing what what tebbit said and got on their bike to find work. Went from the north towards London and rented their house out which paid for a room in a house share! Then when they were finally able to sell up and get a new mortgage they had over 7K taken when its hard enough with OTT Southern property prices. Neither made any gain for their properties as one paid for the other. Typically people without money are being punished.

martindow

Rogerrabbit777 said:

Thank you all for your comments , ive done it as two seperate caculations and its around £7300 so as posted above. It seems very unfair that people who only own one property and are not speculating are treated the same as developers. The only reason they rented their property was because they could not afford to buy a second one so thought renting and renting would be the best bet. Now they have returned and want to downsize and free up cash as they are O.A.Ps and will be charged over 7k for the privilege! Something they can hardly afford.  The same happened to a relative who was charged the same amount for doing what what tebbit said and got on their bike to find work. Went from the north towards London and rented their house out which paid for a room in a house share! Then when they were finally able to sell up and get a new mortgage they had over 7K taken when its hard enough with OTT Southern property prices. Neither made any gain for their properties as one paid for the other. Typically people without money are being punished.

The value of the property has increased considerably with no effort, so it is not unreasonable that this gain is taxed and they will still come away with the bulk of this unearned profit.  During the time it was rented out the tenants provided them with an income. 

I'm sorry this has upset their calculations.  Did they consider the option of living in this house?  No CGT due until it is sold.