Cgt Calculation Check Please

a&akay

For those who understand this horrendously complex tax! Background: Mum's house gifted to my brother and I in equal shares Oct 1988. Neither of us have ever lived in it, she always has, both married. Brother and wife both 22% taxpayers, me 40%, my wife nil but with £1000 interest from savings in 07/08. Am aware of sitting tenant issue about cost at aquisition. No enhancements that we have invoices for. Rough figures at this stage but entered in spreadsheet for exact calulation once known. On track for exchange of contracts by 5 Apr 08.

Disposal Proceeds 150000
Costs of Disposal 4000 (Land Registry Fee + EA Fee + Solicitor + HIP)
Unindexed Gain 146000
Value at Aquisition 30000 (With siting tenant)
Indexation 0.485
Indexed Gain 101450
Taper Relief 40% 40580
Chargeable Gain 60870
4 x CGT Allow 36800
CGT to pay 24070 (Between the 4 of us)
Brother and I 12035 (Each)
I gift my 50% to my wife less the percentage of the house that will give me an exact gain of my £9200 CGT allowance. My brother and wife 25% each. I am aware that HMRC Form 17 requires filling in before 5 Apr for my gift and that Land Registry needs changing to all 4 of us before exchange.
Not too sure about next bit on CGT owed but hope for:

Me Nil
My Wife 4225 at 0% = 0
2230 at 10% = 223
Remainder 5580 at 22% = 1227
Total = 1450

Brother 12035 at 22% assuming don't go into 40% bracket

CLAPTON

I don't think your wife can use her income tax allowance of 5525 but will pay at 10% on the first 2230, the 20% (not 22%) on the rest (assuming she has no income)

silvercar

Calculation looks good and Clapton is right, you can't use your personal allowance for CGT.

a&akay

I've lost the plot! If we sell after 6 Apr 08 then gain would be 116000 using above figures. As no indexation or taper is allowed then 18% = 20800. With 4 x CGT allowances = 38400 we would pay no tax or is the allowance being abolished?

silvercar

Your doing the calcuation in the wrong order.

Gain =116,000

4 x CGT allowance = 4 x 9,200 = 36,800

remaining gain = 116,000-36,800=79,200

Tax at 18% of 79,200= 14,256

carrie_james

not sure if anyone can hep with this, but i really hope so ...

we (me and 2 sisters) inherited a house about 4 years ago now worth about £500k. Its not being lived in at the moment and is need of repair. However, with the changes in CGT next year, would we be better selling it before the changes or after?

me married, working and own house
older sister - not working, owns own house
younger sister, working, lives with mum

any help and advice would be really appreciated.

carrie_james

not sure if anyone can hep with this, but i really hope so ...

we (me and 2 sisters) inherited a house about 4 years ago now worth about £500k. Its not being lived in at the moment and is need of repair. However, with the changes in CGT next year, would we be better selling it before the changes or after?

me - married, working and owns house
older sister - not working owns house
younger sister working and living with mum

any help and advice would be really appreciated.

CLAPTON

do you have a realistic prospect of exchanging contracts before 5th april?

what was the value for probate?

carrie_james

don't really know, i am sure the house will be in demand. The probate value was about £120k which was leasehold at the time, the freehold was bought for about £36 plus expenses.

thanks

CLAPTON

Thats quite an increase in only 4 years.
Do you really mean the freehold was bought for £36?


Anyway in your situation its better to sell after April 6th

To show how it works

sell for 500,000
probate value 120,000
capital gain 380,000
you can deduct selling costs and buying freehold

if contract exchange before april 6th then
taper relief asssuming 4 full years ownership is 5%
so gain now 361,000
so gain per person = 120,333
less CGT allowance of 9,200
so = 111,133 per person
the actual tax depends upon your tax situation.. its 'added' on top of your salary and taxed at 10%, 20% or 40% depending upon the result

so for someone earning zero
then
first 2230 at 10%
the rest at 20%

gives £22,003

if sold after 6th april
no taper relief but still have 9,200 cgt allowance
then flat tax at 18% on 117,466 (i.e. 380,000/3 -9200)
so 21,144

If you have income then its even better to wait.

If you are marrried you can give your spouse half your share and they can use their 9,200 allowance too... but you must do that before exchange of contracts.

carrie_james

thanks ever so much for the explanation.

it was £36k for the freehold, as i am sure you realised.

Carrie