capital gains tax

dillanddodge

Hi.

This is my first time asking, so please be gentle!!

My Dad and I inherited a property together on 21/08/2003. It was worth £60000 at the time.

In Feb 2005, It was worth £80000 and I bought my dad out for £40000. However I took a mortgage of £55k to capital raise. I have now a mortgage of £70k on the property, again to capital raise.

However, Iam badly in debt and thinking of selling the property. The market value today is £105k. If I sold, it would clear all my debts and hopefully leave some over to save and carry out essential repairs on my own house. Is this the right thing to do?

How much capital gains tax would I have to pay?

I have read and reread tax advice but it is all a bit too complicated for me. Can someone please help??

Many thanks. Dillanddodge

CLAPTON

I assume that neither you nor your father have ever lived in the house

what has the house been used for over the last few years?

when your father bought you out in 2005 he made a profit of 10,000 less expenses .. so he would have been liable for a small amount of CG tax.

your CGT would be based on the gain of :

52,500 less 30,000 = 22,500
plus 52,500 less 40,000 = 12,500

so total gain is 35,000

you can take off buying and selling costs and any improvements you have made (but not maintenance)

you have a personal CG allowance of 9,600
so taxable gain is 25,400
and tax would be at 18% of this

if you are married you would benefit by giving half the house to your wife and she can use her CGT allowancew as well.

dillanddodge

The flat has been rented out at £425 per month. For 1st 2 years we split the rent (less letting co fees) which was £180 each. I wasnt working at the time so did not have to pay tax. Now rent covers mortgage and no more. Also pay factor fees every quarter of around £100.00.

How do I get my hubbys name on the deeds - we didnt do this right away as he has children from a previous marriage. We thought we would be keeping the property long term and didnt want them to benefit as it was my sister who died.
If we put his name on the deeds, can we sell immediately, use his allowance i.e take it off the 25400, or would the tax man smell a rat?

Thank you for your reply

CLAPTON

I assume you are in scotland... I dont know if there are any differences between scotland and england so you will need to check

The HMRC allow you to transfer assetts to your spouse but it must be done before exchange of contract.

You will need to remortgage as well as transfer the deeds as your mortgage company has a charge on the house.

dillanddodge

The low rate deal I have on the property has now ended. It is a buy to let so to remortgage would be quite expensive in lender fees - probably about 1.5-2% of the value.Or could I keep the mortgage as it is on the svr and just pay a fee for changing the deeds with the Halifax(they are my current lender). Would also incur legal fees of a few hundred for the remortgage plus some for changing the deeds.

Oh I am so helpless at making decisions!!! I have worked out that if we claim hubby's allowance, it would save £1782. So if lawyer and lender fees come to more than that, I would be better to sell without changing anything. Am I right?

How did you know I am in Scotland?

Dont mean to be writing in italics but have pressed something on laptop and dont know how to sort it! LOL!

CLAPTON

you pressed cntl I to make it in italics so i'm writing in italics now but if you press cntl I again it start writing normally again

anyway you are quite right .. the tax saving will be 9,600 x 18% i.e. 1728 so no point if the total fees/costs exceed that.

and ... in england there are no 'factors'

dillanddodge

Clapton, thanks very much. Your advice has saved me about £1500!!! That will go towards paying off some of the visa bill.

Have looked on Halifax website - £160 to change deeds. Plus legal fees would only be a few hundred. Looks like it would be worth our while to do it.

Also have a tennant in the property at the moment and have to give him 2 months notice to move out so legal work etc should be done in that time. Property can go up for sale from 8th June.

Does anybody want a lovely 2 bed flat in Central Scotland???

Thanks also for teaching me how to use my laptop!!!

:beer: