A CGT question, some guidance please
Discussion
Hi and thanks for any assistance on a property sale
Property bought in early 2004, lived in until late 2009 (about 6 years) when we moved away for work reasons, property became "second home".
Property bought for around £165k, spent around £25k on an extension plus another £20k on bathroom/kitchen etc. So total cost around £210k
(Have some receipts somewhere for the extension)
Expected value now around £250k although we would like more due to location etc.
So its not been our main residence now for around 4.5 years but probably hasn't increased in value since we left it as house prices in that area have stagnated.
Are we likely to get stung for CGT and how do the find out about it and how do they "bill" you?
Thanks for any guidance you can give.
T
Property bought in early 2004, lived in until late 2009 (about 6 years) when we moved away for work reasons, property became "second home".
Property bought for around £165k, spent around £25k on an extension plus another £20k on bathroom/kitchen etc. So total cost around £210k
(Have some receipts somewhere for the extension)
Expected value now around £250k although we would like more due to location etc.
So its not been our main residence now for around 4.5 years but probably hasn't increased in value since we left it as house prices in that area have stagnated.
Are we likely to get stung for CGT and how do the find out about it and how do they "bill" you?
Thanks for any guidance you can give.
T
Good question from Eric. You might be able to double-up the £11k annual allowance.
Your "gain" is time-apportioned between when you have and haven't lived in the house. And there's an 18 month "holiday" at the end. This link will take you through it,
http://www.theguardian.com/money/2014/aug/21/capit...
You need to get your own tax situation properly worked through in detail, either on your own or with the assistance of a tax adviser. Where proceeds of sale exceed £44k in a year (which yours will) you need to make a full declaration to HMRC in your tax return even if your actual chargeable gains don't exceed £11k. That means sending HMRC a fully detailed calculation which you need to be able to substantiate if they choose to come and ask questions. Note that your "acquisition costs" include any stamp duty you had to pay as well as legal fees etc. Similarly your costs of disposal include the estate agent, legal fees, VAT and so on. For a large taxable disposal it's well worth while getting all this stuff right.
Note: Do not try to sidestep HMRC on this one. They have a very big computer which knows who owns and sells property (from Stamp Duty) and who is renting out property (from income tax returns). Their computer is highly proficient at joining the dots....
Your "gain" is time-apportioned between when you have and haven't lived in the house. And there's an 18 month "holiday" at the end. This link will take you through it,
http://www.theguardian.com/money/2014/aug/21/capit...
You need to get your own tax situation properly worked through in detail, either on your own or with the assistance of a tax adviser. Where proceeds of sale exceed £44k in a year (which yours will) you need to make a full declaration to HMRC in your tax return even if your actual chargeable gains don't exceed £11k. That means sending HMRC a fully detailed calculation which you need to be able to substantiate if they choose to come and ask questions. Note that your "acquisition costs" include any stamp duty you had to pay as well as legal fees etc. Similarly your costs of disposal include the estate agent, legal fees, VAT and so on. For a large taxable disposal it's well worth while getting all this stuff right.
Note: Do not try to sidestep HMRC on this one. They have a very big computer which knows who owns and sells property (from Stamp Duty) and who is renting out property (from income tax returns). Their computer is highly proficient at joining the dots....
I'm assuming you didn't let the house in the period it wasn't your main residence because you say it was a second home. If you let it, you'll have no gain. It you didn't, you normally time apportion the gain, ie approx 11k chargeable gain before your annual allowance, which is currently 11k. If you need that allowance for other gains, I'd gather evidence that the gain all arose before you moved out and therefore argue there is no taxable gain.
OP -based on what you've said, you would be entitled to Private Residence Relief (for most of the gain)
Basically any capital gains arising during the time that you lived in the property is exempt from CGT. The last 3 years are also exempt from CGT. That leaves just a couple of years (by my calcs) where any gains were taxable. Chances are they would be less than £11k.
Basically any capital gains arising during the time that you lived in the property is exempt from CGT. The last 3 years are also exempt from CGT. That leaves just a couple of years (by my calcs) where any gains were taxable. Chances are they would be less than £11k.
Countdown said:
OP -based on what you've said, you would be entitled to Private Residence Relief (for most of the gain)
Basically any capital gains arising during the time that you lived in the property is exempt from CGT. The last 3 years are also exempt from CGT. That leaves just a couple of years (by my calcs) where any gains were taxable. Chances are they would be less than £11k.
It's no longer 3 years. It's 18 months. Basically any capital gains arising during the time that you lived in the property is exempt from CGT. The last 3 years are also exempt from CGT. That leaves just a couple of years (by my calcs) where any gains were taxable. Chances are they would be less than £11k.
Apologies for not getting back earlier on this request -
-yes its jointly owned
-it was last the main residence in Aug 2009
-does the cost of the extension we built counter any of the value increase?
-is the £11k allowance per annum? If so I would have though we were well inside of that.
-it was valued (but I don't think in writing, need to check) by the local estate agent in 2009 or 2010 at "offers over £225K". I would say it hasn't increased much on that; we thought it was undervalued then and would be looking for £250k.
No other significant capital gains, just a few losses in shares.
thanks
edited to fix a typo
-yes its jointly owned
-it was last the main residence in Aug 2009
-does the cost of the extension we built counter any of the value increase?
-is the £11k allowance per annum? If so I would have though we were well inside of that.
-it was valued (but I don't think in writing, need to check) by the local estate agent in 2009 or 2010 at "offers over £225K". I would say it hasn't increased much on that; we thought it was undervalued then and would be looking for £250k.
No other significant capital gains, just a few losses in shares.
thanks
edited to fix a typo
Edited by Skyedriver on Wednesday 25th February 13:00
Skyedriver said:
Apologies for not getting back earlier on this request -
-yes its jointly owned
-it was last the main residence in Aug 2009
-does the cost of the extension we built counter any of the value increase?
-is the £11k allowance per annum? If so I would have though we were well inside of that.
-it was valued (but I don't think in writing, need to check) by the local estate agent in 2009 or 2010 at "offers over £225K". I would say it hasn't increased much on that; we thought it was undervalued then and would be looking for £250k.
No other significant capital gains, just a few losses in shares.
thanks
edited to fix a typo
The cost of an extension will increase the base cost for your calculation so yes, reducing the gain.-yes its jointly owned
-it was last the main residence in Aug 2009
-does the cost of the extension we built counter any of the value increase?
-is the £11k allowance per annum? If so I would have though we were well inside of that.
-it was valued (but I don't think in writing, need to check) by the local estate agent in 2009 or 2010 at "offers over £225K". I would say it hasn't increased much on that; we thought it was undervalued then and would be looking for £250k.
No other significant capital gains, just a few losses in shares.
thanks
edited to fix a typo
Edited by Skyedriver on Wednesday 25th February 13:00
Your CGT allowance is an annual allowance but only with gains that crystallise in the year, you can't average the gain over multiple years! As it is joint ownership then you effectively get twice the allowance (or half the gain each)
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