CGT Question

bluelee75

I hope someone can help with this. I actually posted the same question last year, but I am sure there have been changes to CGT since then so am asking once own a property in Scotland which I have rented out for the last 7 years. I bought it in 1998 for £32k and lived in it for a year, and I have remortgaged twice to release equity - current mortgage is £89k approx. I am now thinking of selling this property and using the profit to buy a bigger home for me and my husband but am not sure about how much CGT I would be liable to pay, and if there is any way I can avoid paying too much tax. The property is now worth about £120k so I'd be making a profit of around £30k. I would be grateful if anyone could give me a brief breakdown of how it works, and whether or not I could transfer the property to my husband, thereby not having to pay CGT at all?

terryw

bluelee75 wrote: »

I hope someone can help with this. I actually posted the same question last year, but I am sure there have been changes to CGT since then so am asking once own a property in Scotland which I have rented out for the last 7 years. I bought it in 1998 for £32k and lived in it for a year, and I have remortgaged twice to release equity - current mortgage is £89k approx. I am now thinking of selling this property and using the profit to buy a bigger home for me and my husband but am not sure about how much CGT I would be liable to pay, and if there is any way I can avoid paying too much tax. The property is now worth about £120k so I'd be making a profit of around £30k. I would be grateful if anyone could give me a brief breakdown of how it works, and whether or not I could transfer the property to my husband, thereby not having to pay CGT at all?

CGT has been changed this year. Basically no indexation and 18 per cent CGT on gain. Annual exemption is £9600

Transfers between husband and wife are exempt. But CGT will be due when it is eventually sold.

terryw

CLAPTON

It works like this

sale value now 120,000
purchase price 32,000
profit = 88,000
less say 3000 buying and selling costs
so profit now 85,000

period of ownership = 10years (you need to work this out in months but the principle is the same)
it was you principal private residence for 1 year

so you can claim PPR relief for 1 year plus the last 3 i.e. 4 years

so PPR relief is 4/10 of 85000 = 34,000
and you can claim letting relief for the less of PPR, 40,000 or 7/10 of 85000

so another 34,000

so taxable profit is now 17,000
you have your personal CGT allowance of 9,600
so you pay tax on 7,400 at 18% i.e. £1,332

bluelee75

Thank you - that's exactly what I wanted to find out!

terryw

bluelee75 wrote: »

Thank you - that's exactly what I wanted to find out!

Well, hit the thanks button as Clapton has done all the calculations for you.


terryw