Sale of land - CGT question
Discussion
Simple
Subtract what you get when you sell it from what you paid when you bought it. If you have made a profit, you have made a Capital Gain and that is the figure on which you will have to pay Capital Gains Tax.
You are allowed to deduct from the gain any costs you incurred when you originally purchased the land and any costs incurred when selling it.
Example
Buy land 2011 - £100,000
Legal fees etc on purchase - £10,000
Total cost of land - £110,000
Sell land 2016 for £250,000
Legal costs etc on sale - £15,000
Sale proceeds - £250,000
Cost of land - £100,000
Costs on purchase - £10,000
Costs on sale - £15,000
Total costs - £125.000
Gain - £125,000
SDLT is incurred by the buyer (if it is applicable) at the time of purchase.
Subtract what you get when you sell it from what you paid when you bought it. If you have made a profit, you have made a Capital Gain and that is the figure on which you will have to pay Capital Gains Tax.
You are allowed to deduct from the gain any costs you incurred when you originally purchased the land and any costs incurred when selling it.
Example
Buy land 2011 - £100,000
Legal fees etc on purchase - £10,000
Total cost of land - £110,000
Sell land 2016 for £250,000
Legal costs etc on sale - £15,000
Sale proceeds - £250,000
Cost of land - £100,000
Costs on purchase - £10,000
Costs on sale - £15,000
Total costs - £125.000
Gain - £125,000
SDLT is incurred by the buyer (if it is applicable) at the time of purchase.
Zyp said:
Thanks Eric.
If the land is held in joint names, and one name is a higher rate tax payer and the other basic rate, what rate would be payable?
Can't seem to find much on the Gov website.
If held in joint names, the gain is split between the two parties who each pay the rate of CGT applicable to their personal circumstances.If the land is held in joint names, and one name is a higher rate tax payer and the other basic rate, what rate would be payable?
Can't seem to find much on the Gov website.
Edited by Zyp on Wednesday 25th November 16:48
I don't understand what you mean. What do you mean by "uplift"?
YOU bought the land at a certain price.
You sell the land later. You make a profit selling that land. The profit is yours. You pay the tax on the profit.
All quite straightforward really.
If you chose to give some of the proceeds of your sale to the person who you bought the land from originally, that is a personal "gift" from you to them, and, in theory, would not be subject to any tax - although you would need to make a note of the amounts involved for Inheritance Tax Purposes if you fell off the perch within seven years..
Unless of course, when you bought the property from them originally, there was a "deal" whereby they were going to get some of the proceeds of the eventual sale. That would mean that they didn't actually sell the property to you at all in that they retained certain "rights" to the property and were therefore still part owners all the time you thought you owned it outright.
YOU bought the land at a certain price.
You sell the land later. You make a profit selling that land. The profit is yours. You pay the tax on the profit.
All quite straightforward really.
If you chose to give some of the proceeds of your sale to the person who you bought the land from originally, that is a personal "gift" from you to them, and, in theory, would not be subject to any tax - although you would need to make a note of the amounts involved for Inheritance Tax Purposes if you fell off the perch within seven years..
Unless of course, when you bought the property from them originally, there was a "deal" whereby they were going to get some of the proceeds of the eventual sale. That would mean that they didn't actually sell the property to you at all in that they retained certain "rights" to the property and were therefore still part owners all the time you thought you owned it outright.
The chap we bought the land off had a covenant put on it - that he receives 30% of the uplift in value if / when we get planning permission on said land. (Within 20 years of buying it off him)
Hypothetically there's a potential uplift of £730k.
Therefore, he's due £220k.
Would that constitute a gift?
I assume he would also have to pay CGT on that amount?
Hypothetically there's a potential uplift of £730k.
Therefore, he's due £220k.
Would that constitute a gift?
I assume he would also have to pay CGT on that amount?
It's not a gift as he obviously had a material interest in the property - even though he had sold it. It is a CGT matter as far as he is concerned and he must return it to HMRC.
However, it is a COST for CGT purposes as far as YOU are concerned because you are having to pay this amount out of the proceeds of the sale - so the proceeds you are receiving are that much less.
With the amounts involved I would sure hope that both of you have an accountant helping you do this all correctly.
However, it is a COST for CGT purposes as far as YOU are concerned because you are having to pay this amount out of the proceeds of the sale - so the proceeds you are receiving are that much less.
With the amounts involved I would sure hope that both of you have an accountant helping you do this all correctly.
Gassing Station | Finance | Top of Page | What's New | My Stuff