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Joshua
Joshua, Lawyer
Category: UK Tax
Satisfied Customers: 24527
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Please can you look at this scenario. I am a higher tax payer

Resolved Question:

Please can you look at this scenario. I am a higher tax payer and I would like to know the CGT if I was to sell my property.

I moved into the property and this was my main home at the end of April 2003 and lived in the property until 8th December 2010. It is now currently let.

I paid £ 285000, for the property. If I was to sell it for £ 340000( - 2% estate agents fees) what would be the CGT payable.

Also the rent that I am receiving is £ 247.00 per month short of the mortgage figure

I look forward to hearing from you

Graham
Submitted: 1 year ago.
Category: UK Tax
Expert:  Joshua replied 1 year ago.

Josh-2010 :

Thanks for your question. Please kindly RATE my answer when you are satisfied

Josh-2010 :

When was the property purchased please - 2003?

Customer:

I believe it was on the 29th April 2003

Josh-2010 :

Thanks. Do you know own another property?

Customer:

Yes,

Josh-2010 :

Thanks. My apologies for the slight delay in reverting to you. I have just had to take a phone call briefly...

Customer:

That's ok, I thought you had forgotten me

Customer:

Only joking

Josh-2010 :

So sorry.

Josh-2010 :

Do you live in your other property as your main residence? Are you able to move back into your original property even for a relatively short time before you sold that property?

Customer:

yes the other property is our main residence, and how long does the short time need to be as it is possible

Josh-2010 :

There is no statutory time period that is prescribed. You need to show that it is genuinely your main residence for a period of time - this need not be more than a month or so. To demonstrate main residence you need to demonstrate that you genuinely live there most of the time for that period. However yo may not need to rely on this based on the figures you quote.

Josh-2010 :

Is the property owned in your sole name or with a partner/spouse?

Customer:

if I did not move back in what would the tax liability be. the property is in sole name

Josh-2010 :

Do you have a spouse or long term partner you trust?

Customer:

yes

Josh-2010 :

thank you. In order to calculate your gain, you need to add up the total number of years you have owned the property and divide the gain by that number of years. . This gives you your yearly gain.

Josh-2010 :

from that figure, you can deduct those years in which you were resident in the property, and, if you are prepared to move back into the property prior to selling the same, you can deduct the three years prior to the point you move back in as well.

Josh-2010 :

from this figure, you can further deduct your annual unused allowance of £10,900 and private lettings relief. The maximum amount of Letting Relief due is the lower of:

Josh-2010 :

  • £40,000

  • the amount of Private Residence Relief due or

  • the amount of gain you've made on the let part of the property

Josh-2010 :

If you are married you can in addition consider making a transfer of half the property into your joint names prior to a sale in order to benefit from two allowances of £10,900 rather than just one.

Josh-2010 :

Is there anything above I can clarify for you?

Customer:

A bit confused. I have worked out that I had the property for 10 years so that would be an yearly gain of £ 5500.00. So how do I deduct the years in which I was a resident and what would the end figure be?

Josh-2010 :

I will work out a calculation for you if you just bear with me for a moment...

Customer:

thanks josh

Josh-2010 :

Calculation as follows not including any of the fees you can deduct in terms of acquisition nor sale:
Gain after applying annual exempt amount of 10900 is 44100

Remaining annual exempt amount is 0

Gain after applying losses brought forward of 0 is 44100

Divide by 11 years = 4009

Discount 8 years = 32072

12028 Taxable at 28% = 3367

0 Taxable at 18% = 0

Total = 3367

Josh-2010 :

Based on what you say you should be able to apply private lettings relief to the period you let the property which should assist in offsetting the tax due on that period which may allow you to reduce your CGT gain to zero without the need to move back into the property nor transfer into your spouses name.

Josh-2010 :

Is there anything above I can clarify for you?

Customer:

Many thanks Josh

Josh-2010 :

A pleasure

Josh-2010 :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with though please reply back to me though.

Joshua, Lawyer
Category: UK Tax
Satisfied Customers: 24527
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
Joshua and 4 other UK Tax Specialists are ready to help you

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