Capital gain tax

EightFiveTwoDude

Hi all 

I was wondering if someone could give me some advice.  

I purchased (cash) property (call it property A) (shared ownership with spouse ) in 2019 and lived in it until 2023 - then we moved to a different city and rented out property A at eg 600£ and at the same time we were renting a property in new city for 1000£ a month. 

Now we want to sell property A to purchase a house where we now live but  came across this thing called capital gain tax.  My spouse is a housewife with no income and I am earning 52k+ 

how much CGT do we have to pay? Is there anything we do to reduce it? Because the rent we are paying now is more than double of the rent we get out of property A

Bookworm105

rent utterly irrelevant

is A owned by both you and spouse? 
In what proportion? 50/50?


CGT is the difference between what you sell it for "now" and what you paid to buy it in 2019
you can deduct some costs from that:
- Legal fees incurred on purchase
- Legal fees incurred on sale
- EA fees incurred on sale

that will give you a "gross gain" figure £. Split that into your respective shares (eg 50/50) and then do the rest explained below:

Work out the % of time out of your total ownership period (measured in either exact days or rounded months, but NOT years)  that you lived in it as your main home. Obviously as you moved out to a different city then that date is when it ceased to be your main home.
as a tax concession you are then allowed to add "the final" 9 months of ownership to the "main home" period so your % will be slightly more than the actual time you physically occupied it (assuming of course you do not move back to it during the final 9 months you own it). 

that % x the £ gross gain = amount of gain exempt from CGT (technically called Private Residence Relief "PRR")
As you are legally married, the PRR % will be the same for each of you (even if she moved in after you)

You will then (each) pay CGT on your respective net balance:
 gross gain - PRR - CGT allowance (Currently £3,000) = net taxable gain 

you will each pay CGT at either 18% and/or 24% depending on how much of your respective net taxable share falls into the basic rate band

Calculate your gross income liable for income tax less income tax personal allowance (12,570) = £B
If £ B is more than 37,700 (basic rate income tax band) then all of your gain is subject to 24% CGT.
If £B is less than 37,700 then that difference is subject to 18% CGT and any excess over 37,700 is taxed at 24%

IMPORTANT: YOU (each) MUST DECLARE AND PAY THE CGT WITHIN 60 DAYS of the completion date of your sale 
If you don't, you will be heavily penalised.

The above are simple facts that you can look up yourself:
Capital Gains Tax: what you pay it on, rates and allowances: Overview - GOV.UK

Capital Gains Tax: what you pay it on, rates and allowances: Reporting and paying Capital Gains Tax - GOV.UK

Tax when you sell your home: Private Residence Relief - GOV.UK

  

EightFiveTwoDude

Perfect - thank you very much  for the explanation. ❤️❤️❤️❤️❤️