Capital Gains Tax
Discussion
Not sure on the above so thought I would ask, hopefully someone can point me in the right direction.
Purchased a flat 9 years ago from my Brother whilst I was serving in the Army (I'm retired now) abroad. I never lived in it as my Brother continued to do so (it was to release equity to get him out of debt). I will be selling the flat in the next six months so trying to work out how I go about sorting out the capital gains tax and how much it could be. Also, will they take into account renewing the lease etc (£8k)? Other issue is value as it looks like a friend may be buying it, so I'll not need to use estate agents. Will they use the price I sell it for, as a guide to the tax I'm required to pay or is there another way the value it?
We are not talking great amounts here as I purchased it for 90k (plus the extra 8k lease ext) and it's probably worth 110k now. Also, due to my Brothers situation he only ever payed my £88 interest only mortgage payments whilst he lived there.
Purchased a flat 9 years ago from my Brother whilst I was serving in the Army (I'm retired now) abroad. I never lived in it as my Brother continued to do so (it was to release equity to get him out of debt). I will be selling the flat in the next six months so trying to work out how I go about sorting out the capital gains tax and how much it could be. Also, will they take into account renewing the lease etc (£8k)? Other issue is value as it looks like a friend may be buying it, so I'll not need to use estate agents. Will they use the price I sell it for, as a guide to the tax I'm required to pay or is there another way the value it?
We are not talking great amounts here as I purchased it for 90k (plus the extra 8k lease ext) and it's probably worth 110k now. Also, due to my Brothers situation he only ever payed my £88 interest only mortgage payments whilst he lived there.
A pity you never lived there as you could have obtained Lettings Relief - https://www.taxinsider.co.uk/1383-Lettings_Relief_...
CGT is charged on the difference between the purchase price and what you sell it for - https://www.gov.uk/tax-sell-property/work-out-your...
What do you mean by 'renewing the lease'? Are you actually talking about an extension (e.g. upping the remaining term of, say, 70 years back to 99 or higher)?
Those costs will be deductible as the extension will have increased the capital value of the asset. That is because the shorter the remaing term the harder it is for a buyer to get a mortgage.
In turn this diminishes the asking price and pool of available buyers. Those you may get will use that advantage to leverage the price accordingly.
CGT is charged on the difference between the purchase price and what you sell it for - https://www.gov.uk/tax-sell-property/work-out-your...
What do you mean by 'renewing the lease'? Are you actually talking about an extension (e.g. upping the remaining term of, say, 70 years back to 99 or higher)?
Those costs will be deductible as the extension will have increased the capital value of the asset. That is because the shorter the remaing term the harder it is for a buyer to get a mortgage.
In turn this diminishes the asking price and pool of available buyers. Those you may get will use that advantage to leverage the price accordingly.
Sorry forgot, yes, I renewed the lease so it cost me 8k for an extra 99 years.The sum, in general terms, is:
Actual selling price, net of legal and selling fees: £A
Less purchase price, including any legal and stamp duty costs, and any capital improvement costs: £B
Profit: £C (=£A-£B)
Less Personal CGT allowance: £11,100
Net taxable gain: £E (=£C - £11,100)
Tax will be at 18% if, on adding the net taxable gain to your annual income from all sources, you are still within the basic rate tax band.
28% on that proportion of the gain that is in the higher rate tax band on carrying out the above calculation.
If you sell a property at a loss, ie the number at C above is a minus, then don't forget to enter the loss on your tax return. You can carry such losses forwards for ever, and use them against future capital gains. But you can't if they occurred more than 6 years ago and you haven't recorded them on a tax return, as far as I am aware.
Actual selling price, net of legal and selling fees: £A
Less purchase price, including any legal and stamp duty costs, and any capital improvement costs: £B
Profit: £C (=£A-£B)
Less Personal CGT allowance: £11,100
Net taxable gain: £E (=£C - £11,100)
Tax will be at 18% if, on adding the net taxable gain to your annual income from all sources, you are still within the basic rate tax band.
28% on that proportion of the gain that is in the higher rate tax band on carrying out the above calculation.
If you sell a property at a loss, ie the number at C above is a minus, then don't forget to enter the loss on your tax return. You can carry such losses forwards for ever, and use them against future capital gains. But you can't if they occurred more than 6 years ago and you haven't recorded them on a tax return, as far as I am aware.
Once again thank you for the information and assistance.
Yes, the 8k was including both the legal and valuation costs for myself and the freeholder. I've also had a new combi boiler fitted, new bathroom installed and the roof repaired all within the last 12 months (have all receipts).
Yes, the 8k was including both the legal and valuation costs for myself and the freeholder. I've also had a new combi boiler fitted, new bathroom installed and the roof repaired all within the last 12 months (have all receipts).
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