UK Tax Questions? Ask a UK Tax Advisor for answers ASAP
Thanks for your question. Please kindly RATE my answer when you are satisfied
Did you move back into the property at any time prior to the sale please?
I lived in the property between 2003-2004, then 2007-July 2010, but didn't live there again after that
Thanks. With your permission I will be with you in a couple of minutes. I have just had to take a phone call. My apologies for the short delay...
No problem. In the meantime - a couple of additional details. On the mortgage my father was a joint owner, although I made all the payments and relevant tax returns. I extended the lease on the property in 2010 which cost £17000. This was never claimed against tax as I was living in the property at the time.
Sorry for the delay in reverting to 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.
From that figure, you can deduct those years in which you were resident in the property.
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:£40,000
the amount of Private Residence Relief due or
the amount of gain you've made on the let part of the property
If you carried out improvements providing you can evidence the money spent you can also deduct the costs of such improvements from the gain. Do you know how much you spent in improvements that you can evidence?
Is it only improvements in that tax year?
No it is the total cost of improvements that you can evidence during the period of your ownership.
Quite a lot, I put in central heating and did some work in the bathroom, as well as extending the lease. Does the lease count as an improvement?
Can you give me a figure just so I can prepare a calculation. It can always be amended later on. An estimate will do for now.
The central heating cost me £6000, the bathroom work was roughly £1000, and the lease cost me £17000.
Thanks - is this a lease extension?
Thanks. If you would bear with me for a few moments I will prepare a rough calculation
Calculation as follows:
Purchase £145000. Sale £194000 Less Costs of £24000.
Therefore Gain is 25000
Divide by Nine Years of ownership Yearly gain is 2777 x 4 year of non occupation = 11111
Gain after applying annual exempt amount of 10600 is 511
Remaining annual exempt amount is 0
Gain after applying losses brought forward of 0 is 511
511 Taxable at 28% = 0
Total = 143.08
I'm so glad I asked, I thought it was going to be thousands!
The above calculation does not take into account the fact that you can apply agents and legal costs and stamp duty from the gain. This on its own should reduce your gain further and after that you can still apply lettings relief as above so there should be no tax payable on the sale based on the above figures.
Presumably I still need to complete a return though - the rest of my tax is taken PAYE?
Unless you normally complete a self assessment return if you have calculated that there is no tax to pay after finalising the costs as above, you don't need to give HMRC details of your disposal. Retain the receipts etc and a copy of your calculation however in case HMRC query the disposal in the future.
Does the above answer all your questions or is there anything I can clarify or help with any further?
No, that's great - many thanks!
A pleasure. 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.
I will do, and thanks again.