Capital gain tax

Old_Git

I am thinking of selling a rented property . 

Can anyone help with the tax calculation before I make a final decision . 

Bought for £40000 
sold £56000 
costs buying / selling / improvements 
£4000 
basic rate tax payer . Never lived in property . 

Can anyone advise before I decide to sell .

p00hsticks

Owned for how many months ?

eskbanker

https://www.gov.uk/tax-sell-property/work-out-your-gain explains the workings and includes a calculator.

Old_Git

p00hsticks said:

Owned for how many months ?
owned from 2005……………….

………………………………..

Keep_pedalling

If the only improvements you did were some decorating and replacing broken parts you can’t claim them as that is classed as maintenance and you would have been able to offset those costs against your rental profit. 

[Deleted User]

If ALL the improvements are capital expenditure the gain is £12000. Take off your exemption and £9000 is chargeable. Otherwise you can only deduct the buying and selling costs and the gain is higher. 

If, when adding this to your other income, you remain a basic rate taxpayer the gain will all be chargeable at 18%. 

It is not relevant as to how long you owned the property as you never lived in it. 

emgus53

[Deleted User] said:

If ALL the improvements are capital expenditure the gain is £12000. Take off your exemption and £9000 is chargeable. Otherwise you can only deduct the buying and selling costs and the gain is higher. 

If, when adding this to your other income, you remain a basic rate taxpayer the gain will all be chargeable at 18%. 

It is not relevant as to how long you owned the property as you never lived in it. 

Ignore this comment - corrected as per Ferro’s and Bookworm105’s comments below.

As far as I’m aware capital gains aren’t added to other income to calculate adjusted net income and therefore whether you are a basic/higher rate tax payer and subsequent CGT rate - they are treated separately. Unless you consider the buying and selling of properties as your main income, in which case this is no longer a capital gains calculation and it’s all treated as income (less expenses) and relevant taxes applied.

[Deleted User]

emgus53 said:

[Deleted User] said:

If ALL the improvements are capital expenditure the gain is £12000. Take off your exemption and £9000 is chargeable. Otherwise you can only deduct the buying and selling costs and the gain is higher. 

If, when adding this to your other income, you remain a basic rate taxpayer the gain will all be chargeable at 18%. 

It is not relevant as to how long you owned the property as you never lived in it. 

As far as I’m aware capital gains aren’t added to other income to calculate adjusted net income and therefore whether you are a basic/higher rate tax payer and subsequent CGT rate - they are treated separately. Unless you consider the buying and selling of properties as your main income, in which case this is no longer a capital gains calculation and it’s all treated as income (less expenses) and relevant taxes applied.

Sorry - just not correct.  It is most definitely added to other taxable income to determine the rate of CGT payable. How is adjusted net income relevant here? 

In order to determine the RATE of capital gains tax payable one needs to look at how much of the basic rate band is used at other income. If, for example, you had £20000 of PAYE income, 7300 of the basic rate band would be utilised leaving 30400 available. Accordingly the whole capital gain would fall into the basic rate band and be charged at 18%.

If that PAYE income was £50000 however, only £270 of the gain would be charged at 18% with the remainder at 24%. 

Under ‘If you pay basic rate tax’

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

Bookworm105

emgus53 said:

[Deleted User] said:

If ALL the improvements are capital expenditure the gain is £12000. Take off your exemption and £9000 is chargeable. Otherwise you can only deduct the buying and selling costs and the gain is higher. 

If, when adding this to your other income, you remain a basic rate taxpayer the gain will all be chargeable at 18%. 

It is not relevant as to how long you owned the property as you never lived in it. 

As far as I’m aware capital gains aren’t added to other income to calculate adjusted net income and therefore whether you are a basic/higher rate tax payer and subsequent CGT rate - they are treated separately. Unless you consider the buying and selling of properties as your main income, in which case this is no longer a capital gains calculation and it’s all treated as income (less expenses) and relevant taxes applied.

you are entirely incorrect
for the purpose of deciding how much of the net gain is subject to basic or higher rate of CGT you do indeed add your net taxable income for income tax to your net taxable capital gain to give a total "income" figure which is then compared to the income tax thresholds to determine how much, if any, of the basic rate income tax threshold remains. That amount is then the gain portion taxed at 18% with the rest at the higher rate 

emgus53

Apologies, I stand corrected - morning brain fog and confusion between income and taxable income. 

p00hsticks

Old_Git said:

p00hsticks said:

Owned for how many months ?
owned from 2005……………….

………………………………..

The CGT calculation uses months not years. so for the calculation you need the month you bought and the month in which you sell (exchange rather than completion I think)