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Capital gains tax question

Last post Fri, Feb 29 2008, 8:35 AM by pampam. 3 replies.
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  •  Thu, Feb 28 2008, 8:35 PM

    Capital gains tax question

    Capitol Gains Tax question
    Can anyone help me please?

    I have a property that I bought in 1986 for £3,000.
    I lived in it as my main residence until 1997.
    Since then I have rented it out and paid tax on the rent.
    I would now like to sell and I expect to get approx £85,000 from the sale.
    Can anyone tell me how much CTG I will be liable for.I understand that there have been major changes made that will take effect from April 08.
    Any advice greatly appreciated.
    Thanks
    pam
    • Post Points: 20
  •  Thu, Feb 28 2008, 8:58 PM

    Re: Capital gains tax question

    The percentage of capital gains tax depends on your income. Basically, any profits that you make from the sale (minus 9,200 which is free) will be added to your income from other sources (inc employement). The total will then be taxed. So, if alltogheter you have earned less than £34,000 this year you will pay 20% captial gains tax on your profits. If it is above the capital gains tax rises to 40%. I only know these figures because I checked this out myself yesterday.

    More info can be found at www.directgov.uk or on the Inland Revenue website at www.hmrc.gov.uk . Use the search facility and type in capital gains tax.

    Hope this helps.

    • Post Points: 50
  •  Thu, Feb 28 2008, 9:38 PM

    Re: Capital gains tax question

    Hi --- As the house was lived in by yourself up until 97 then it qualifies for CGT exemption as it was your PPR up until that date, there is also a further 3 year rule in which the house continues to qualify after the date you moved out, so that would take you to the anniversary date of vacating the property in the year 2000.

    Here (in 2000) is where the valuation will be taken into account and deducted from the final price you sell the property for, in working out the overall gain and the amount that is taxable. Then ............

    Not only that, but having the main residence exemption available also means that you are entitled to a further exemption called "Private Letting Relief". This further relief applies to exempt up to £40,000 of the gain accruing during the period that the property was being let out as private residential accommodation.

    Example house value year 2000 = £30k and you sell for £85k that eaquals a gain of £55k..... you can then deduct £40k Private letting relief = £15k taxable gain.

    You are then allowed to deduct from this £15k... professional fees and major improvement costs incurred during the period and your personal individual CGT allowance for this current tax year £9200 (double if property was jointly owned). This for examples sake would mean you're liable for CGT on £5000 at 40% = £2000 tax due.(these figures are examples) less if you're a basic rate taxpayer.

    You may find when you finally work out your gain that there is no CGT to pay on this transaction, depending mainly what the value was in the year 2000.

    The above is just an illustration just replace all the figures with your own actual costs.

    If you sell after April 08, I believe the CGT rate is going to be a fixed flat rate of 18% which could further save you money

    • Post Points: 50
  •  Fri, Feb 29 2008, 8:35 AM

    Re: Capital gains tax question

    Thank you all very much for your replys.

    I thought I would have to pay 18% on the full sale value if it was after April.

    Thanks again

    Pam

    • Post Points: 5