Capital Gains Tax - Help please!

paulh1983

Hi all,

I've met myself coming backwards at least twice trying to get my head round this, so I'm hoping that if I can present the scenario below someone will be kind enough to clarify.

I bought my property in June 2008 for £115,000.

I lived in the property until June 2022 when I rented the property out and moved in with my partner (house in her name).  

I'm now looking to sell the property this year, with the tenants due to leave this month.  Hopeful sale value £165,000

My understanding is that I will have to pay some CGT owing to the fact that I was renting the property.  My workings are:

Gains are (sale - purchase price) £165,000 - £115,000 = £50,000.

192 months between purchase and sale.  168 of those were occupied, add the 9 months which takes to 177.  
177/192 = 7.81%

7.81% of £50,000 = £3905

Is this right?  I've also read something about an allowance per year of £3000??

Any help much appreciated as incredibly confused!

Bookworm105

gross gain £165,000 - £115,000 = £50,000
(less any legal fees on purchase and sale)
(less any EA fees on sale)
(less any capital improvements during ownership - with receipts)

Principal Residence Relief 177/192 = 92.18%

net gain 50,000 - (50,000 * 92.18%) = 3,906.25

Taxable gain 3,906.25 - 3,000 (CGT personal allowance) = 906.25

tax payable 906.52 x 18% and / or 28% depending on where you sit on basic and/or higher/additional tax brackets (gross income less income tax personal allowance + taxable gain)

note the above assumes you are sole owner and make sure you declare and pay within 60 days of the completion date 

p00hsticks

paulh1983 said:

Hi all,

I've met myself coming backwards at least twice trying to get my head round this, so I'm hoping that if I can present the scenario below someone will be kind enough to clarify.

I bought my property in June 2008 for £115,000.

I lived in the property until June 2022 when I rented the property out and moved in with my partner (house in her name).  

I'm now looking to sell the property this year, with the tenants due to leave this month.  Hopeful sale value £165,000

My understanding is that I will have to pay some CGT owing to the fact that I was renting the property.  My workings are:

Gains are (sale - purchase price) £165,000 - £115,000 = £50,000.

192 months between purchase and sale.  168 of those were occupied, add the 9 months which takes to 177.  
177/192 = 7.81%

7.81% of £50,000 = £3905

Is this right?  I've also read something about an allowance per year of £3000??

Any help much appreciated as incredibly confused!

I'm not sure of the exact order you do things in, but you can also take buying and selling costs into account when working out the gain too. 
The CGT allowance is indeed £3k, but it;s a 'use it or lose it' allowance so you'll only have one £3k.
Your calculation is on the right lines but once you factor in the costs and allowance you may find you have little or no CGT to pay. . 

I've not had to use it myself, but there is a CGT calculator on the gov.uk website that I believe steps you through the calculation. 
Tax when you sell property: What you pay it on - GOV.UK (www.gov.uk)

Note that you have 60 days after completion to pay any CGT due. 

theartfullodger

Yes, legal costs are I understand allowable. And improvement costs (not repairs) .

But yes ,  you declare and pay within 60 days of the completion sale date - (not all UK countries have completion), so get prepared now, find that paperwork...

paulh1983

Thank you ever so much everyone, much clearer and easier to get my head around!
Next challenge - determining what counts as improvement and not repair costs.  

km1500

that can be a bit of a minefield but Google is your friend there are quite a lot of examples

p00hsticks

paulh1983 said:

Thank you ever so much everyone, much clearer and easier to get my head around!
Next challenge - determining what counts as improvement and not repair costs.  

Before you go too far down that road I'd first run the numbers with just buying and selling costs included to see if you are left with any liability.  

Keep_pedalling

paulh1983 said:

Thank you ever so much everyone, much clearer and easier to get my head around!
Next challenge - determining what counts as improvement and not repair costs.  

You won’t need to uses it buying and selling costs are going to wipe out the taxible gain.

Bookworm105

theartfullodger said:

But yes ,  you declare and pay within 60 days of the completion sale date - (not all UK countries have completion), so get prepared now, find that paperwork...

tell that to .gov
Report and pay your Capital Gains Tax: If you sold a property in the UK on or after 6 April 2020 - GOV.UK (www.gov.uk)
although of course most of what is on there is so dumbed down one can never be sure if they are using the vernacular or actually mean what they say.
For CGT, there is no such thing as a "sale" date. The date of disposal is the date of exchange of an unconditional contract, not the completion date. However, for the tax payment, they "generously" time it from the date you get the money, aka the completion date.

With luck we soon won't have to be concerned about the Scots as they can re-join the EU as one big "independent" Euro political conglomerate controlled, in all real respects, by the French & Germans for their own benefit.