Capital Gains tax.....advice

[dinger]

I bought my property approx 12 years ago for approx £245k., which was used as my main dwelling.
On the 1st Nov 2013 it was let out and valued at £290k +/- 5% . The tenancy agreement has been terminated and ends on the 31st Oct 2015, so just shy of two years and the house has been valued at £330k.

What are the capital gains tax implications if any if the house is now sold ?

Dinger

[Eric Mc]

The gain will be time apportioned between the time it was your main dwelling (plus 18 "free" months) and the time it "WASN'T your main dwelling.

You then deduct your annual personal Capital Gains Tax allowance from the gain. This is currently £11,100. If the property was jointly owned, the gain is split and each party can offset their annual Capital Gains Tax allowance against their share of the gain.

The rates of CGT are 18% and 28% - depending on whether you are a Basic Rate taxpayer for Income Tax or a Higher Rate taxpayer. Even if you normally pay Income Tax at the basic rate, the gain itself can pitch you into the Higher Rate Tax band. If that happens, part of the gain will be taxed at 18% and the rest at 28%.

You can see from the above that having joint ownership confers the potential for large tax savings.

[gibbon]

dinger said:

I bought my property approx 12 years ago for approx £245k., which was used as my main dwelling.
On the 1st Nov 2013 it was let out and valued at £290k +/- 5% . The tenancy agreement has been terminated and ends on the 31st Oct 2015, so just shy of two years and the house has been valued at £330k.

What are the capital gains tax implications if any if the house is now sold ?

Dinger

If you sold at 330, and you bought at 245k then you have 'made' 85k over 12 years. Lets say to make it easy it has been rented for 2yrs. You have an 18 month window where you are free of cap gains tax once renting. So thats 6 months of 12 years its been eligible for cap gains tax. Thats 4.16% of the increase (they dont mark to market).

So 4.16% of 85k is £3.5k.

However you have a personal allowance of 10k ish per year. You also have 40k of renters relief.

So you have no tax liability.

I am not an accountant, so feel free to correct me, but this is my understanding as an investment property owner.

[sumo69]

gibbon said:

If you sold at 330, and you bought at 245k then you have 'made' 85k over 12 years. Lets say to make it easy it has been rented for 2yrs. You have an 18 month window where you are free of cap gains tax once renting. So thats 6 months of 12 years its been eligible for cap gains tax. Thats 4.16% of the increase (they dont mark to market).

So 4.16% of 85k is £3.5k.

However you have a personal allowance of 10k ish per year. You also have 40k of renters relief.

So you have no tax liability.

I am not an accountant, so feel free to correct me, but this is my understanding as an investment property owner.

That wouldn't get top marks as a technical review, but your answer and main points are correct.

Definitely no tax given the facts provided.

David

[dinger]

Thanks guys. For your advice .

[Eric Mc]

This thread is five years old. There have been substantial changes to CGT rules since 2015. I would not use it for general guidance any more, especially if talking about gains on the disposals of residential properties.