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Sam Pathak
Sam Pathak, Mr S Pathak MBA FCCA CTA
Category: UK Tax
Satisfied Customers: 465
Experience:  Tax Consultant & Freelance Lecturer over 9 years experience
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I own a 1 bedroom flat which I lived in for 4 years prior to

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I own a 1 bedroom flat which I lived in for 4 years prior to moving in with my partner. I rented my flat out for the next 11 years, but the flat is currently vacant. I'm in the process of refurbishing the flat before selling in 2014. I owe a small mortgage on the property. I currently do not own or mortgage any other property. Are you able to advise what CGT I would need to pay if I sold the flat for £140k. I currently owe £30k on the mortgage.


Thank you for your question.

Please could you let me know the following:

(1) Actual purchase cost of the flat, 15 years ago? (Amount of mortgage is not relevant.)

(2) Potential refurbishment cost on the flat that you have planned?

(3) Any large refurbishment cost incurred before?

(4) Is the flat in your sole name?

(5) What is your likely total annual income (that is, are you basic rate or higher rate taxpayer) as this would have impact on the CGT rate?

(6) Potential incidental costs of sale, such as, agent fees, lawyers fees etc?

Thank you and look forward to hearing from you.

Kind regards
Sam Pathak
Customer: replied 3 years ago.

Hi Sam


Responses below:


(1) Purchase price = £41,750

(2) £10,000 for refurbishment cost

(3) Upgrade to heating system in 2000 = £3,000

(4) Flat soley in my name

(5) Total annual income = £37,578

(6) Uncertain at this stage but will include agent fees and solicitors - would assume £2.5k as a conservative measure - may be more, may be less.

Dear Liz

Thank you for the additional information.

Your likely Capital Gains Tax (CGT) position on the sale of the flat will be as follows:

As you have lived in the flat as your main residence for 4 years, the last 3 years will also be treated as 'deemed occupied' even if you have not actually physically lived in it in this 3 year period (provided by CGT legislation) - this means 7 years (4+3) out of 15 years (total period owned) will contribute to exempt the gain, under the rules called 'Principal Private Residence/PPR' exemption.

I will show you the draft calculation below.

Sale proceeds £140k
Less: £42k + £10k + £3k + £2.5k
Gain = £82.5k
Exempt gain = 7/15 x £82.5k = £38.5k (PPR exemption)
Taxable gain = £44k
Less: Annual Exemption, say £11k (available by law)
Finally taxable gain = £33k

Bulk of your gain is taxable (CGT) at 28% as:

First approx £4k x 18% = £0.7k approx
Rest £29k x 28% = £8k approx

Total CGT is, therefore, £8.7k approx.

It is advisable to seek professional accountant/tax adviser's service to perform the final tax computation and return.

I trust the above helps.

Best wishes
Sam Pathak
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