Property tax help plus election for main residence

stratty

Malcmandy wrote: »

Stratty, I really just want a maths genius to help me out with the liability amount.The whys and wherefore's aren't part of the remit, but thanx for your concern.

Was the original property let when the second property was nominated as the main residence?

Malcmandy

No. The first property was used as a second home Stratty.

silvercar

Malcmandy wrote: »

House for £15,500 in 1977. Main and only residence.Jointly owned.
1977 -80 Renovation costs CG approved c.£10,000
1982 Estimated value £35,000
1985 New garage built £2,000
Sept 1992 Purchase of attached garage/store from neighbour £15,000.
Renovation to attached annexe CG approved £12,000
1995 -96 Extensions CG approved £31,00
Sept 2001 Sale of house as a whole £200,000 +fees.
Mortgage of £100,000 taken out in 1999 and repaid on sale.

Dec 1988. 2nd house purchased and nominated as Main Residence until sold at end of 1993. 1st house then reverted to main residence.

Would anybody be kind enough to number crunch the figures including index and taper relief for the CG liability please ?

Thanx.

With no liability for errors:
corrected in later post
Ownership was for 24 years, of which only 5 years were not PPR so any gain will be reduced to 5/24 ths of total.

15,500 purchase price, indexation brings it up to 1.047 x 15,500 + 15,500 = 31,729. Add to that

1977-80 renovation : 10k
1985 garage : 2k
1992 store purchase and renovations:15k+12k=27k
1995-96 extensions: 31k

Total: 101,729. [ not sure whether subsequent purchases/ renovation would be indexed or not, so I've assumed not for simplicity.]

gain= 200k-101,729= 98,271

applying taper relief for 3 years ownership 1998-2001= 5% reduces gain to 93,357

PPR relief reduces this to 5/24 x 93,357= 19,449.

Against this you could have put your CGT allowance(s) of £7,500 per person if not used elsewhere.

So for a jointly owned property, the gain reduces to 19449- 15k= 4,449.
If owned by one person the gain is 19,449-7,500=11,949.

All charged at marginal rate. For a higher rate tax payer, the bill would be 1780(joint owned), 4779 (single owned).

stratty

as the asset was acquired before 17th March 1998 and its a non business asset then it qualifies for a bonus year for taper relief. 4 years for Taper = 10% reduction

silvercar

Reworking, taking account stratty and jimmo's comments:

Starting point is 1982 valuation of 35,000.

Ownership for PPR purposes was for 19.5 years, of which only 5 years were not PPR so any gain will be reduced to 5/19.5 ths of total.

1985 garage : 2k, indexed = 3414
1992 store purchase and renovations:15k+12k=27k, indexed =31509
1995-96 extensions: 31k, indexed = 33821

[assumed all improvements took place mid year]

Total of original price and improvements = 103744

gain= 200-103744=96256

applying taper relief for 4 years ownership 1998-2001= 10% reduces gain to 111,407=86630

PPR reduces this to 5/ 19.5 = 22213

Against this you could have put your CGT allowance(s) of £7,500 per person if not used elsewhere.

So for a jointly owned property, the gain reduces to 22,213- 15k= 7,213.
If owned by one person the gain is 22,213-7,500=14,713.

All charged at marginal rate. For a higher rate tax payer, the bill would be 2885 (joint owned), 5885 (single owned).

silvercar

Link to "kink" test, if anyone wants to work out which way it applies:

http://www.hmrc.gov.uk/pdfs/2002_03/capital_gains/ir280.pdf

Malcmandy

Thank you SO much for your time and help. The annexe date was September 1992 and the extensions January 1995 £22,000 and January 1996 £9,000.

Malcmandy

Sorry, I have made a few mistakes !
The 2nd property was purchased in November 1983 and sold at the end of 1993.
The 1995 - 96 extensions were £31,000.
I do apologise.