Capitan Gains Tax

by **aliman22** on Fri Jan 27, 2012 9:56 pm

Hi,
I have a second property which I bought in July 2001 for £261,000. I lived in the property for 3 years immediately after I purchased it. It is currently let out and has been since July 2004. I plan to sell the property and could make a profit of up to £140,000. I would like to know how much CGT I would have to pay on this gain. Currently I earn around £10,000 per year.
I will be grateful for any advice on this issue. Thank you all in advance.

by **Peter D** on Fri Jan 27, 2012 11:20 pm

Just under £3,000 due to PPR (PRR) and Letting relief but real dates would help and cost of acquisition and legal and sales fees would help as they are deductible as are any capital expenditure like a conservatory. Regards Peter

by **aliman22** on Sat Jan 28, 2012 7:26 am

Thank you so much for your prompt reply Peter. Would you be kind enough to give me a breakdown of how you came to this figure. It will help me understand everything more clearly.
Once again thank you in advance.

by **aliman22** on Sat Jan 28, 2012 7:26 am

Thank you so much for your prompt reply Peter D. Would you be kind enough to give me a breakdown of how you came to this figure. It will help me understand everything more clearly.
Once again thank you in advance.

by **aliman22** on Sat Jan 28, 2012 7:27 am

Apologies for the double post.

by **Peter D** on Sat Jan 28, 2012 11:10 am

Lets have the real dates and the costs. Peter D

by **pqtaxation** on Sat Jan 28, 2012 12:56 pm

aliman22 wrote:Thank you .. Peter D. Would you be kind enough to give me a breakdown of how you came to this figure. It will help me understand everything more clearly.

Peter D wrote:Let's have the real dates and the costs.

Is there not at least some benefit from giving the OP (aliman22) the methodology for calculating the indicative capital gains tax (CGT) payable of under £3k using the indicated dates and gain of £140k, which gain would of course be reduced by including allowable costs of acquisition and disposal and of any capital improvements?

The £140k indicative gain will occur over about 11 years of ownership, so about £12.7k per year. First three and last three years are/will be relieved by main residence relief and three years of letting relief (about £38k which is less than £40k maximum relief allowed) leaving only about 2 years unrelieved.

Chargeable gain at 18% = (2/11 *140 -10.6 annual exempt amount for 2012/13 if this is only gain/loss) at 18% = about £15k at 18% = under £3k

In the exact calculation to be submitted with self-assessment to HMRC, all time periods should be refined to months and days; claimed costs will require documentation in case of query.

The CGT rate is 18% because OP’s taxable earnings of about £10k will be offset by personal allowance of about £8k to leave about £2k which when added to £15k will mean basic rate income tax of 20% and basic rate CGT of 18% will apply (rather than higher rate(s) of income tax or the higher rate of 28% for CGT).

by **aliman22** on Sat Jan 28, 2012 1:17 pm

My sincere thanks to both Peter D and pqTaxation for their invaluable inputs. I now have a much clearer understanding of everything.
Thank you very much.

by **Peter D** on Sat Jan 28, 2012 1:39 pm

It's silly season and I do not have the time tto work it out long habd. I use a purpose spead sheet that required the dates, rental periods, values, fees, ownership and gross income and it spits out the results and steps. I still suggest you supply them and I'll run the numbers for you. Are you the only owner and are you married. Regards Peter

by **aliman22** on Sat Jan 28, 2012 3:15 pm

Hi Peter D,
I will give the information as accurately as I can so here goes
1. Property purchased 06/07/2001 for £261,000
2. We moved out of property July 2004 (Can not remember exact date) after purchasing new home.
3. Property let out from 01/12/2004 and has always been since then. Still let out at present. This is a private tenant and not through an agent so no fees payable.
4. Rental income is £15000 per year.
5. Possible achievable sale price in current market is £410,000
6. Outstanding mortgage on property is £270,000
7. Possible profit £140,000
8. My current gross income is around £10,000
9. I am married and the only owner of the property.

I hope this will make it easier for you to work everything out for me. Thank you for your valuable time.
Kind regards
aliman22