This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Cpt liability on house disposal

kennyfh
Posts:2
Joined:Thu Oct 30, 2008 12:59 pm

Postby kennyfh » Tue Oct 28, 2008 4:00 pm

Wife bought a house on 26/5/92 for £25000 and incurred £500 legal fees.
She sold it exchanging and completing on 31/3/08 for £58000.
There has been aprox £3750 spent on enhancements over the years.
She lived in the house for the first 3 years, then has let it out ever since, latterly to her father.
Could any tell me what tax would be payable on this if any. I did read somewhere that any gain on a house that has been used as a main residence in part is except for the first £40000 of gain.
Thanks in advance.

Simon Sweetman
Posts:1690
Joined:Wed Aug 06, 2008 3:11 pm

Postby Simon Sweetman » Tue Oct 28, 2008 4:46 pm

Sadly, you read wrong. The gain is roughly £58000 less £25500, so £32500 (the "enhancements" may be allowable but only if reflected in the value of the house when sold.

It had been owned for 190 months. The first three are exempt, and the rules also exempt the last three : so 72/190 is exempt leaving a chargeable gain of £20184. The annual exemption is £9600 so £10584 is chargeable at 18% - tax bill £1905.

Lee Young
Posts:2707
Joined:Wed Aug 06, 2008 3:26 pm
Contact:

Postby Lee Young » Tue Oct 28, 2008 5:14 pm

I think Simon may have forgotten about indexation and lettings relief, which I think will take the gain close to if not below the annual exemption for 2007/08.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

Simon Sweetman
Posts:1690
Joined:Wed Aug 06, 2008 3:11 pm

Postby Simon Sweetman » Tue Oct 28, 2008 5:22 pm

Whoops ! i'd got into 2008/9 mode and Lee is quite right.

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Postby Peter D » Tue Oct 28, 2008 7:48 pm

Lee is spot on the gain is below the allowance. I need the date she left the property and the rental dates and the sales and legal fees to be sure and I will give you the numbers. I have not included the enhancements as you have not declared what they are. They may have been deductible form the rental income. I assume she has declared the rental income to HMRC for the rental years. Regards Peter

kennyfh
Posts:2
Joined:Thu Oct 30, 2008 12:59 pm

Postby kennyfh » Wed Oct 29, 2008 12:52 pm

Thanks for the replies so far.
In answer to your questions Peter:
She left the property on 1/9/1995.
It was rented out from then until it was sold on 31/3/2008.
The property was sold to the local council, so there was not any sales fees, and the council paid the legal fees.
The enhancements over the years were for replacement central heating and some double glazing, which were carried out when she lived there so the cost was not deducted from any rental income.
Finally, yes the rent has been declared to the inland revenue over the years.

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Re: Cpt liability on house disposal

Postby Peter D » Fri Oct 31, 2008 3:06 pm

Based on your information here are the figures:
Capital Gains Summary

Purchase Price £25,000 26/05/1992
Indexation 0.167 £29,175
Legal Fees £500
Sale Price £58,000 31/03/2008
Enhancements £0
Legal Fees £0
Gross Gain £28,242
PPR Relief £11,148 £17,094
Letting Relief £11,148 £5,946
Taper Relief 40% £3,567
CG Allow'ce 1 £9,200 -£5,633
CG Bill £0

As there is no CGT I have not used any enhancement costs and as you pointed out no sales or legal fees on disposal. Notive the Letting Relief was you savour here. A '-' denotes a negative number as unused relief or allowances.

Regards Peter


Return to “Capital Gains Tax, CGT”