CGT on BTL calculation question

[nickfrog]

Hi - I am selling a BTL after a couple of years - it's co-owned with my wife. Am I right in thinking that in the year of disposal we can use both our CGT allowance of £11,100, giving us £22,200 worth of tax free capital gain ?

I am hoping to sell for £160,000, leaving us a small exposure - we are both at the threshold of higher tax. Will the gain then push us beyond it and we will be effectively paying 28% on the CG beyond £22,200 ? And 18% on the small section up to the higher tax threshold ?

Lastly, what is the basis of calculation of the CG ? In other words what can we legally add to the price out of this :



Can we take out the estate selling agent fees?

Thanks a lot !

[Eric Mc]

All of those costs are allowable.

Also, most of the selling costs you incurred will be allowable too.

[nickfrog]

Thank you very much!

[Eric Mc]

You might want to consider getting an accountant to help you out on this.

[rotarymazda]

Out of interest, are you selling due to the changes in interest rate tax relief?

[sumo69]

Estate Agent, Solicitor and any associated selling costs are allowable - perhaps £2-2.5k + VAT

From your figures, chargeable gain would be £13.5-14k each less the £11k exemption so £2.5-3k taxable - if you have this ceiling in your basic rate band then this will be @ 18%, if not 28% or perhaps hybrid of the two.

David

[audidoody]

If the place was ever your main residence you get lettings relief and reduction in CGT

[nickfrog]

Thx all, no never lived there nor would we get a chance. We're not selling due to the loss of interest relief but because we feel that we are already slightly past the optimum time to sell fiscally as our CGT exposure can only grow at the higher rate and organically. We plan to make the most of the yearly allowance by using it as often as possible by flipping BTLs.

[nickfrog]

Flat sold : we have made a larger capital gain than expected. This will tip me over the higher tax threshold and we'll pay 38% tax.

Am I right in thinking that if I ask my employer to dedicate all my salary until the end of the tax year (3 months, ie approx £12k gross) to the pension scheme, I am creating headroom and will only then pay 28% on at least some of the capital gain ?

[uknick]

nickfrog said:

Flat sold : we have made a larger capital gain than expected. This will tip me over the higher tax threshold and we'll pay 38% tax.

Am I right in thinking that if I ask my employer to dedicate all my salary until the end of the tax year (3 months, ie approx £12k gross) to the pension scheme, I am creating headroom and will only then pay 28% on at least some of the capital gain ?

CGT rates are 18% and 28%. Where did you get 38% from?

In answer to your question, you can reduce your marginal tax rate by increasing your pension contributions to the maximum allowed by HMRC in a tax year.

[Ginge R]

Just chatting with a client who has two rented out properties. 'BTL, she said.. 'Buy to lose'.

[nickfrog]

uknick said:

CGT rates are 18% and 28%. Where did you get 38% from?

In answer to your question, you can reduce your marginal tax rate by increasing your pension contributions to the maximum allowed by HMRC in a tax year.

I don't know. Just thought it was 28 and 38, but that's wrong, clearly 18% and 28% and at least half of it will be at 18% now thx to the additional pension contribution and the headroom created.

[nickfrog]

Ginge R said:

Just chatting with a client who has two rented out properties. 'BTL, she said.. 'Buy to lose'.

I am not sure what I have lost with a net profit after tax of 13% / year and a 4% yield per year after tax for the duration of the ownership ?

[Ginge R]

I think her comment was more a light hearted one, based on declining future prospects, and similarly offered.