Student's liability for taxes on 'By to Let' flat when flat is sold.

[ACASJONES]

My daughter(a student)bought a flat in 2001 for £220000. The flat is now worth £280000. During this time the flat was let for all but 2 periods of 2/3 months. My daughter lived in halls of residents for 3 of these 5 years,spent a year in Paris as part of her course for another and for the last year she has rented another flat herself in London. She now wants to sell the flat and buy somewhere for herself in London. What tax will she have to pay on the original flat, and is there anything she can do to reduce this.

[Peter D]

Your daughter is liable for the increase in value i.e. 60K times her maringal tax rate. As she rented it out she must have been declaring the income to the IR so I suspect it is at 22% so it could bve £13,200 - the exemption od £8,800 so £4,400

[al_eebee]

Depending on exactly when she bought it and sells it there will be some taper relief due reducing the chargeable gain to between 80 & 90% depending on the number of complete years of ownership.

Taking the middle line (85%) the chargeable gain before annual exemption would be £51k - £42.2k after the annual exemption.

Assuming no other income in the year that will be assessable

2,150 @ 10% = £215.00
31,150 @ 22% = £6,230.00
8,900 @ 40% = £3,560.00
Total £10,005

[hashman]

I disagree with both of the above calculations -

Re Peter D's - the £8,800 annual CGT exemption is not in terms of tax but in terms of a reduction to the gain

Re al_eebee's - the middle rate should be 20% not 22%

[al_eebee]

Yup. Your quite right. More haste less speed Alan