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Answered in 8 minutes by:
3/19/2012
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,712
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
VerifiedHi.
The amount of the mortgage on the property is irrelevant as far as CGT is concerned. That was just how you funded all or part of the development costs. A gain is calculated by deducting what you paid for the property from what you sell it for. If the property is jointly owned, each of you and your wife will be entitled to exemption for the first £10,600 of your respective shares of the gain.
As far as the rental income is concerned, the rate of tax, if any, that you and your wife will each pay will be dependent on the level of your respective incomes from all sources. If you are 20% taxpayers, you will each pay £480 per annum in tax and if you are 40% taxpayers, you will each pay £960 per annum in tax.
Let me know if you have any further queries.
The amount of the mortgage on the property is irrelevant as far as CGT is concerned. That was just how you funded all or part of the development costs. A gain is calculated by deducting what you paid for the property from what you sell it for. If the property is jointly owned, each of you and your wife will be entitled to exemption for the first £10,600 of your respective shares of the gain.
As far as the rental income is concerned, the rate of tax, if any, that you and your wife will each pay will be dependent on the level of your respective incomes from all sources. If you are 20% taxpayers, you will each pay £480 per annum in tax and if you are 40% taxpayers, you will each pay £960 per annum in tax.
Let me know if you have any further queries.
Unless you move in for a year or so, you cannot avoid paying CGT unless you either make no profit or the gain is lower than two CGT exemptions. Even if you did live in the property for a year before selling it, the Revenue may claim that you moved into it to avoid tax and disallow the claim for private residence relief. It's not that well known but if your intention when you buy a property is to make money from it, a claim for main residence relief can be disallowed.
If you did live in the property for a year or so (the longer the better) before selling it, you could also claim letting relief which would reduce the taxable gain further assuming the Revenue allowed the claim for main residence relief You can read about that in HS283.
If you did live in the property for a year or so (the longer the better) before selling it, you could also claim letting relief which would reduce the taxable gain further assuming the Revenue allowed the claim for main residence relief You can read about that in HS283.
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,712
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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