Capital Gains on second property

RKDB

Hi I hope someone can help me with a CGT question.

I have a property that is in joint names with my wife purchased in 2006.
We lived in the property (main residence) for 5 years and have let the property for the last 7 years. We will make a gain when we sell (looking to sell over the next couple of months). I am high rate tax payer and my wife does not work. I realise the new 18% rate comes into play in April and Indexation is aboloshed but is there any way I can reduce my CG bill? Do I calculate my gain based on the original purchase price or the price when we started to rent the property? Any help would be appreciated. Thanks!

fengirl_2

I assume you mean you purchased the property in 1996?
The period in which you occupied the property is exempt, as are the final 3 years of ownership. A gain up to £45k on the let period is also exempt. If you can confirm dates and give examples of purchase and sale price, I can be more explicit.

RKDB

Thanks fengirl. To clarify:

Property purchased in 1996 for 167,500
Expected sale price 600,000

Looks like we will sell after April this year not sure if this changes your reply significantly. Thanks again

fengirl_2

OK - sale price 600,000
Cost price 167,500
Gain 432,500

Months of ownership, say 12 x12 = 144 mths (you would have to calculate exact months)

Exempt period when house lived in 5 x 12 = 84
Exempt charge 432,500/144 x 84 = 252,291 - for period lived in
Exempt charge 432,500/144 x 36 = 108,125 - for final 3 years
Total exemt charge 360,416

Total gain (as above) 432,500
less exempt periods 360,416
Chargeable gain 72,084
less exemption for let property 40,000
Net chargeable gain 32,084 - half each

You also need to allow for purchase and sale costs (estate agent and solicitor).

RKDB

Will we also be able to deduct our annual exempt amount of 9200 each against the net chargable gain?

RKDB

Final question, will the changes coming into play in April 2008 have an impact on the calculation methodology you have used?

fengirl_2

If you sell before 5 April you get your 9200 exemption each. If you sell after 6 April, you dont get your exemption, but a stright 18% charge.
The calculations above are not affected (unless the exemptions are withdrawn in the budget.)

Ian_W

fengirl,

Exempt period when house lived in 5 x 12 = 84

When I did my 12 times table at school 5 x 12 was 60.
Has the 12 times table been revised by the National Curriculum?

If you sell before 5 April you get your 9200 exemption each. If you sell after 6 April, you dont get your exemption, but a stright 18% charge.

Are you sure about that? From what I've read tapering and indexation goes - but the CGT personal allowance remains.

RKDB

Thanks Ian. Will the tapering & indexation being scrapped impact the exempt periods (5 years) and the lease exemption (3 years)?

Ian_W

Will the tapering & indexation being scrapped impact the exempt periods (5 years) and the lease exemption (3 years)?

No, they're covered by PRINCIPLE RESIDENCE RELIEF - completely different and no changes proped that I'm aware of.

The reason I used was I know from other posts that fengirl works or worked for HMRC. My understanding from general reading is that the personal allowance [x2 in your case] would still be applicable but she may know something you & I don't.