Capital gains on property I lived in as a council tenant

Iwouldratherwalk

Hi All, 

I have scoured through here but can't find a post that answers my specific question and I'm hoping someone will be able to help me.

I moved into a council property (one bed flat) in 1995 as a council tenant.  In 2000, I used the right to buy and purchased the flat from the council.  I continued to live in the flat until 2006 at which time I borrowed against the flat for a deposit on my current home.   I have had tenants in there ever since.  I am planning on selling the flat in the next 18 months and am doing some early preliminary maths to work out my potential capital gain.  Will the years I lived there before buying the flat, as a council tenant,  count towards my private residents relief?  Or just the years after I bought it?  

I have read through the information on Gov.co.uk but still can't work this out!

Also, does anyone know approximately what kind of figure an accountant usually charges to deal with this process?  I've done so much official paperwork on my own but this one feels too daunting, and I feel I will miss something out. 

Thank you!

silvercar

The starting point is the time you bought it as that is when you first had a financial interest in it. 

Your gain will be from the reduced price when you bought it, to the time you sell it. You can then take off any buying and selling costs and improvements. So that gives you the gain.

Discount that by a factor acknowledging the time it was your home. So sell in 2027 having bought in 2000 and you have 27 years of ownership, discounted by 6 years it was your home and the last 9 months of ownership, though do this calculation in months. Roughly speaking you are going to be taxed on 75% of the gain (less costs).

CGT allowance of £3k.

An accountant would charge a few hundred pounds as a guess.

Iwouldratherwalk

Thank you for that info, it's very useful and informative.  I have one more question...  you (or someone else) may know the answer.  I am currently a basic rate tax payer, would the % my capital gain automatically be based on the fact I am a basic rate payer, or would the gain then increase my earnings for that year?  Based on the info you just gave me, the tax would either be approx £26,000 on 18% or £41,000 on 28%.  Maybe I am looking at the wrong percentages?  

RAS

It's based on your taxable income. They don't charge you 40% income tax and 18% CGT, yet.

Iwouldratherwalk

Thank you.  I am due a slight pay rise this year of about 2500 per year which takes me into the higher rate tax bracket.  I'd have to pay almost an extra 9000 on my capital gains because of this it seems.  Maybe I'll ask my boss to keep it safe for me for 18 months!  

Keep_pedalling

Iwouldratherwalk said:

Thank you.  I am due a slight pay rise this year of about 2500 per year which takes me into the higher rate tax bracket.  I'd have to pay almost an extra 9000 on my capital gains because of this it seems.  Maybe I'll ask my boss to keep it safe for me for 18 months!  

No it won’t cost you an additional £9k in CGT. As it is you will only pay the lower rate on a very small part of your gain as the rate is not dependant on income alone. So for example if your income is £2k below the higher rate of IT then you pay the lower amount on the first £2k of your gain and the higher rate on the rest.