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Where Taxpayers and Advisers Meet

Capital Gains Tax calculation

armour
Posts:4
Joined:Sun Sep 12, 2021 12:41 pm
Capital Gains Tax calculation

Postby armour » Sun Sep 12, 2021 12:50 pm

Hi all,

This will probably be a bit incoherent so apologies in advance.

A friend of mine has asked me to work out her CGT liability for a flat she is selling. The bare facts are these:

She bought the flat in May 2000 at a purchase price of £78,000. The completion statement indicates £79,800 was paid including stamp duty, solicitor's fees, searches etc.
She lived there til August 2004 and since then has rented it out continually from August 2004 til June 2021.
The flat is currently under offer at £242,000 and estate agent & solicitor's fees should be around £4,000. She expects the sale to complete by the end of October.

From this data I calculate that the taxable Capital Gain will be £238,000 - 79800 = £158,200 x 0.8 (I get the 0.8 figure by dividing the length of time the flat was let by length of ownership.) = £126,560.

The lady in question does not expect to get much other income this financial year. Perhaps a maximum of £5,000 only.

Therefore I calculate the tax payable as:

£12,300 free of tax (Capital gains allowance)

£7,570 free of tax (residual personal allowance)

£37,701 taxed at 18% = £6,786

£68,989 taxed at 28% = £19,317.

So total CGT would be £26,102.

I am sure I will have made some errors - or maybe omitted some allowances - here, so I (and she) would welcome any comments which may clarify the situation.

Thanks all,
Chris.

Jholm
Posts:220
Joined:Mon Mar 11, 2019 4:22 pm

Re: Capital Gains Tax calculation

Postby Jholm » Mon Sep 13, 2021 9:24 am

This seems more or less on point.

Using rough dates and assuming sale in Oct 2021, I get a gain of approx. £121k.

I think the difference is that you have not included the final 9 months (through to October 2021) as deemed occupation, for PPR relief purposes.

Don't forget you need to report the gain and pay tax within 30 days of completion.

robbob
Posts:3149
Joined:Wed Aug 06, 2008 4:01 pm

Re: Capital Gains Tax calculation

Postby robbob » Mon Sep 13, 2021 9:52 am

JHolm
This seems more or less on point.
Thats probably being a bit generous here JHOLM

armour
£7,570 free of tax (residual personal allowance)
You cannot use personal allowance against capital gains !! so this amount needs to be removed from "no tax" and will therefore be taxed at higher rate - as JHOLM has pointeed out don't forget about the bonus final 9 months if that period wasnt included in your calcs.
Also don't forget about the 30 day reporting deadline !!

armour
Posts:4
Joined:Sun Sep 12, 2021 12:41 pm

Re: Capital Gains Tax calculation

Postby armour » Mon Sep 13, 2021 12:42 pm

Thanks for the replies.

I hadn't heard about the 9 months bonus relief, and I don't know where I got the idea of using unused personal allowance.

To be clear then. If the taxable gain is £121,000 then:

£12,300 free of tax (Capital gains allowance)

£37,701 taxed at 18% = £6,786

£71,000 taxed at 28% = £19,880

So total CGT would be £26,666?

iwmtaxadvisor
Posts:23
Joined:Wed Sep 09, 2020 5:12 pm
Contact:

Re: Capital Gains Tax calculation

Postby iwmtaxadvisor » Mon Sep 13, 2021 1:32 pm

The only other item we would be looking for is any expenditure during the rental which she could not claim as an income expense and which qualifies as a capital improvement.
- look for us on Google "iWMTaxAdvisor"


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