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Where Taxpayers and Advisers Meet

CGT on selling an off plan property

Margarita
Posts:1
Joined:Fri Aug 21, 2015 7:51 pm
CGT on selling an off plan property

Postby Margarita » Fri Aug 21, 2015 8:09 pm

Hi,

me and my partner own an apartment we live in for 5 years.

2 years ago we've decided to move to a larger apartment and we bought an off plan property.

The markets have moved to our favour and now we're thinking to sell the off plan property and buy something different.

Would we have to pay the CGT and how do i calculate how much?

Let's say the profit we'd make on the off plan is 100K. I know i can deduct the allowance and the fees, let's say these are 11K and 6K respectively. This leaves 82K for 2 of us, so 41K each.
If one of us is on a higher tax rate (earning over 42K/year), would we pay 28% of the 41K?
If another one is earning below 42K/year, would they pay 18%?

Did i calculate correctly?

What can be done to reduce the tax burden, if anything?

Thank you!

King_Maker
Posts:6538
Joined:Wed Aug 06, 2008 3:22 pm

Re: CGT on selling an off plan property

Postby King_Maker » Sat Aug 22, 2015 9:49 am

It might be prudent to have a Memorandum to confirm your original intentions - otherwise the gain/profit could be subject to Income Tax (and NI) as a property trader.

If CGT is the appropriate tax, each of you will pay 18%, 28% (or a mixture of both) depending on your circumstances (including income) for the relevant tax year.

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: CGT on selling an off plan property

Postby LozaACCS » Sat Aug 22, 2015 12:27 pm

Whilst I acknowledge that it is a subject very much open to interpretation (and intention), I would not entirely agree with Kingmaker.
You state that your original intention was to move to a larger apartment, this would not be indicative of property trading/development,particularly since there does not seem to have been any development. you also appear to have lived in it as your main residence, whether or not you elected for it to be your main residence would not be an issue in my opinion.
So the increase in value would be subject to CGT and therefore exempt as a consequence of it being your main residence.
If a gain did arise your partners share would be taxed at 28%
Your share would be taxed at 18% on the remainder of the basic rate band less your taxable income and 28% on the rest

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

Re: CGT on selling an off plan property

Postby Peter D » Sat Aug 22, 2015 12:47 pm

" you also appear to have lived in it as your main residence" if you mean the off plan property, I do not think they moved into it. Regards Peter

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: CGT on selling an off plan property

Postby LozaACCS » Sat Aug 22, 2015 8:08 pm

Peter D

Fair point, perhaps the OP could confirm, if that is the case then CGT still in point in my opinion


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