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Where Taxpayers and Advisers Meet

CGT Calculation Help

Dev_1
Posts: 51
Joined: Sun Jun 18, 2017 4:00 pm

CGT Calculation Help

Postby Dev_1 » Sat Feb 29, 2020 11:54 pm

Hi

Is anyone able to assist with calculating if any CGT is due, we are awaiting exact valuations which have been done but may take a week to come through.

I have kindly received a reply previously however these are revised figures and just wanted them checked and any reply would be very much appreciated.

The transactions details for the property are below I would be extremely grateful if someone would be able give any thoughts on how much CGT if any would be due.


1:-First purchased in 1986 by mother and father.
Purchase price - £72,000
Costs associated - £1,500

2:- Property passed to mother through survivorship on fathers death in 2006. Probate value at the time given as £249,000, no formal valuation completed. ( we have requested a retrospective valuation, we are concerned that the valuation may be about £20k-£30 less of £249,000 so just wanted adjusted figures to know what to expect.

3:- Mother transfers 50% equity gift of property to son in 2010, value estimated of the entire house £350,000, no formal valuation completed. (Again we have requested a retrospective valuation for this date but I don’t think this really matters.

5:- Current market value for house is £500,000 previously thought to be £450,000 - £475,000.

Property has remained my mother’s main residence from 1986 to 2016 when it became a let and remains a BTL.

With the Lettings relief and the PRR would you know how much if any CGT would be due.

Previous calculations were based on £50,000 improvements being made, we did incur this as we added a loft room. But I wanted to know what the calculation would be without the £50,000 improvement as part of calculation.

Any help with be very much appreciated.

Many thanks

Dev_1
Posts: 51
Joined: Sun Jun 18, 2017 4:00 pm

Re: CGT Calculation Help

Postby Dev_1 » Sat Feb 29, 2020 11:58 pm

Should have mentioned that my mother is planning on transferring her remaining share to me, making me 100% owner that’s why the above is required.

AGoodman
Posts: 1029
Joined: Fri May 16, 2014 3:47 pm

Re: CGT Calculation Help

Postby AGoodman » Mon Mar 02, 2020 11:32 am

Taking the headline figures:

Her base cost is £73,500/4 + £249,000/4 = £80,625 - say £80k for simplicity

Gain is therefore 500,000/2 - 80000 = £170,000

Regular PPR is 30/34 * 170000 = 150,000
Lettings relief 4/34 = £20,000 (does not hit £40k cap).

Therefore no unrelievable gain. I've ignored the relief she would receive automatically for the last 12/18 months for simplicity.

I assume you know lettings relief is about to disappear so time is of the essence.

Dev_1
Posts: 51
Joined: Sun Jun 18, 2017 4:00 pm

Re: CGT Calculation Help

Postby Dev_1 » Mon Mar 02, 2020 9:11 pm

Thank you for your reply.

Yes I am aware of the new rules around lettings relief that’s the reason why we are acting now.

I get everything you have kindly said, apart from her base costs. Is there a reason why both her base cost amounts have been divided by 4 as oppose to 2?.

I was under the impression her base costs would be half of original price + inherited share in 2006 at the time when my father passed away. Therefore making 36,750 + 124,500 = 161,250.

As mentioned property was originally purchased by both parents together in 1986, father passed away in 2006, in 2010 mother’s transfer 50% equity to son (me).,

Now in 2020 she wants her remaining 50% to be transferred over to me.

Sorry apologies if I have not understood it properly.


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