Lay person needing help please

by **massifal** on Thu Mar 11, 2010 5:02 pm

I have read various articles including the accidental landlord section but the more I read the more I am getting confused.
I think to someone in the know this is probably quite simple.

I bought a property in 1986 for £ 30,000 this was my main residence until 1994.
I bought another house in 1994 which then became my main residence,the first property has been let out ever since.
Therefore I have owned the property for 24 years , 8 years as a home &16 of which it has been let out.
The current value of the property is now £ 130,000.
It is owned jointly with my spouse.
I am now considering disposing of this asset and want to know how much CGT I would be liable for.

I have worked it like this IS THIS CORRECT

Total gain £ 100,000 / 24 years of ownership
= £4166 Per annum

Exempt gain £4166 x 11 (8 years of residency + last 3 years rule)
= £45,833

Chargable gain £ 100,000 - 45,833 Exemption
= £54167
Current rate 18% of £54167
=CGT Payable £9750

PLEASE PLEASE PLEASE ADVISE IF THIS IS CORRECT

by **Ian Wright** on Thu Mar 11, 2010 5:14 pm

The good news is you have left out another relief known as lettings relief which is the lower of:-

The proportion of gain when you lived their
the proportion of the gain when let
or £40,000

http://www.hmrc.gov.uk/manuals/cg4manual/cg64710.htm

If you owned it jointly then each person gets this allowance.

You are also due your CGT annual exemption unless you have used this elsewhere.

Hope this helps.

Ian

by **massifal** on Thu Mar 11, 2010 5:21 pm

Thanks for the quick reply Ian.
This is where I start losing track on how to apply the lettings relief and can we (as it is joint) apply personal cgt allowance on top?
Can you please explain or show example (sorry if I am being a bit thick)

by **Ian Wright** on Thu Mar 11, 2010 5:28 pm

Hi Massifal,

You both get lettings relief and you both get an annual exemption. That is if of course if your partner had lived in the property at some time!

I have to dash and if no one gives you a fully reply I will do the calculation for you tomorrow.

Regards

Ian

by **Peter D** on Thu Mar 11, 2010 5:49 pm

Hee you go. Good News.
Capital Gains Summary

Purchase Price £30,000 14/06/1986

Legal Fees £0
Sale Price £130,000 14/06/2010
Enhancements £0
Legal Fees £0
Gross Gain £100,000
PPR Relief £45,833 £54,167
Letting Relief £80,000 -£25,833
CG Allow'ce 2 £10,100 -£46,033
CG Bill £0

You need to remember that PPR apportionment is done in Whole months and LR is in Whole days. PPR 36 months exemption is deemed residence so LR van not be claimed for that period. You need to use actual dates. 1986 is not a date it is a year.

All that said there is no CGT liability for a disposal on 14/6/2010.

'-' numbers indicate unused relief's or allowances.

Note you have used all your LR which is limited to £40,000 so it is just the chage to the PPR apportionment and the house price that can use up all the relief's.

It may be free of CGT for the next 3 or 4 years. Regards Peter

by **Peter D** on Thu Mar 11, 2010 5:51 pm

Sorry a few typo's, rushing, as I am behind today. Regards Peter

by **Peter D** on Thu Mar 11, 2010 5:52 pm

I assume that you have been declaring the rental income/profit to HMRC. Regards Peter

by **Incredulum** on Fri Mar 12, 2010 12:43 pm

I am surprised letting relief is 80k, when the PPR relief is only 45k?

by **Ian Wright** on Fri Mar 12, 2010 1:28 pm

Me too. Letting relief can not be higher than PPR since the test says the lower of PPR, let period and £40k. I think the mistake is halving the gain for two persons and thus lowering the PPR and letting period gains below £40k.