capital gains tax to pay?
Discussion
Completely lost with this, so hoping someone can help...
The wife and I own a second property that we currently rent/ It is on a repayment mortgage (couldn't sell when we moved, so rented it instead). We have been approached by our tenants who are interested in buying it, which suits us.
On the figures, we owe ~ £100k inc mortgage early repayment fees. We are proposing a £130k sale price, with 10% gifted equity. All seems simple - we get 17k, they get the house. Job done. This I am happy with. I am trying to work out on which figure the capital gains tax is calculated - would it be on the 130k sales price, or the 117k actual price (13k being landlord gifted equity deposit). If it is 117k, as I calculate it, we pay no CGT. If its the 130k, I calculate there is tax to pay. Can anyone confirm if we will pay it.
Figures are thus:
Agreed sale price £130k
Gifted deposit £13k
Actual sale price £117k
Mortgage owed £96k
Repayment fees £3k
Will we pay CGT?
The wife and I own a second property that we currently rent/ It is on a repayment mortgage (couldn't sell when we moved, so rented it instead). We have been approached by our tenants who are interested in buying it, which suits us.
On the figures, we owe ~ £100k inc mortgage early repayment fees. We are proposing a £130k sale price, with 10% gifted equity. All seems simple - we get 17k, they get the house. Job done. This I am happy with. I am trying to work out on which figure the capital gains tax is calculated - would it be on the 130k sales price, or the 117k actual price (13k being landlord gifted equity deposit). If it is 117k, as I calculate it, we pay no CGT. If its the 130k, I calculate there is tax to pay. Can anyone confirm if we will pay it.
Figures are thus:
Agreed sale price £130k
Gifted deposit £13k
Actual sale price £117k
Mortgage owed £96k
Repayment fees £3k
Will we pay CGT?
Tax Man said:
You can deduct costs of buying, selling or improving your property from your gain. These include:
estate agents’ and solicitors’ fees
costs of improvement works, eg for an extension (normal maintenance costs don’t count, eg for decorating)
If you have kept receipts I can't see there being any tax to pay.estate agents’ and solicitors’ fees
costs of improvement works, eg for an extension (normal maintenance costs don’t count, eg for decorating)
The balance remaining on the mortgage has no bearing whatsoever when calculating Capital Gains Tax.
Capital Gains Tax relates to the "Capital Gain" on the property (kind of makes sense). In other words, the tax is charged on the "gain" in the value of the asset between when you bought it and when you sold it.
You bought it for £98,000.
It looks like the total sales proceeds will be £130,000. That gives a basic gain of £32,000.
If you incurred any "enhancement costs" on the property over the years you owned it, these could be added to the original purchase cost, thereby reducing the gain. Enhancement Expenditure is when the owner incurs capital costs on the property, such as major improvements work, extensions etc. Ordinary repairs and maintenance costs do not count.
In addition, you will incur some legal costs etc regarding the sale of the property. These are also deductible, further reducing the gain.
On the assumption the gain remains around £30,000, as the property is jointly owned, the the gain is split 50:50 between the two owners, making a gain for each individual of £15,000.
The personal Capital Gains Tax allowance for 2015/16 is £11,100. This means that each individual would pay Capital Gains Tax on £3,900 (£15,000 less £11,100).
Capital Gains Tax is calculated at either 18% or 28%. If the person is a basic rate taxpayer, 18% is the rate used. 28% is used when the person is a higher rate taxpayer.
So, the maximum Capital Gains Tax payable would be around £1,100 per individual.
Capital Gains Tax relates to the "Capital Gain" on the property (kind of makes sense). In other words, the tax is charged on the "gain" in the value of the asset between when you bought it and when you sold it.
You bought it for £98,000.
It looks like the total sales proceeds will be £130,000. That gives a basic gain of £32,000.
If you incurred any "enhancement costs" on the property over the years you owned it, these could be added to the original purchase cost, thereby reducing the gain. Enhancement Expenditure is when the owner incurs capital costs on the property, such as major improvements work, extensions etc. Ordinary repairs and maintenance costs do not count.
In addition, you will incur some legal costs etc regarding the sale of the property. These are also deductible, further reducing the gain.
On the assumption the gain remains around £30,000, as the property is jointly owned, the the gain is split 50:50 between the two owners, making a gain for each individual of £15,000.
The personal Capital Gains Tax allowance for 2015/16 is £11,100. This means that each individual would pay Capital Gains Tax on £3,900 (£15,000 less £11,100).
Capital Gains Tax is calculated at either 18% or 28%. If the person is a basic rate taxpayer, 18% is the rate used. 28% is used when the person is a higher rate taxpayer.
So, the maximum Capital Gains Tax payable would be around £1,100 per individual.
I didn't twig that the seller was giving back £13,000 to the buyer. If that is the case, they are effectively selling it for less than the agreed sale price so, yes, the proceeds on sale is not £130,000 but £117,000.
What value will show at the Land Registry?
Why is the vendor willing to accept a figure less than originally agreed?
On what sale value will the estate agent calculate their fee?
What value will show at the Land Registry?
Why is the vendor willing to accept a figure less than originally agreed?
On what sale value will the estate agent calculate their fee?
Eric Mc said:
I didn't twig that the seller was giving back £13,000 to the buyer. If that is the case, they are effectively selling it for less than the agreed sale price so, yes, the proceeds on sale is not £130,000 but £117,000.
What value will show at the Land Registry?
Why is the vendor willing to accept a figure less than originally agreed?
On what sale value will the estate agent calculate their fee?
Didn't reply yesterday as working. What value will show at the Land Registry?
Why is the vendor willing to accept a figure less than originally agreed?
On what sale value will the estate agent calculate their fee?
I have no idea what value the Land Registry will show.
130k is top market price. With estate agents fees and paying for the inevitable empty house for months if i sold on open market i would end up with around 117k anyway. Why not be stress free with no viewings or negotiations and at the same time give the tenants who are nice honest people a leg up onto the property ladder.
No estate agents involved. No need to pay £2k when i have a buyer...
Ive got it in my head that the sale figure will be 117k and therefore no CGT to pay as deposit doesn't really exist as it is equity and has a theoretical value only if that nakes sense. Dont really want to pay CGT if i can avoid it. Riles me that HMRC would chase this yet leave billions unchased from companies!
Eric Mc said:
The balance remaining on the mortgage has no bearing whatsoever when calculating Capital Gains Tax.
Capital Gains Tax relates to the "Capital Gain" on the property (kind of makes sense). In other words, the tax is charged on the "gain" in the value of the asset between when you bought it and when you sold it.
You bought it for £98,000.
It looks like the total sales proceeds will be £130,000. That gives a basic gain of £32,000.
If you incurred any "enhancement costs" on the property over the years you owned it, these could be added to the original purchase cost, thereby reducing the gain. Enhancement Expenditure is when the owner incurs capital costs on the property, such as major improvements work, extensions etc. Ordinary repairs and maintenance costs do not count.
In addition, you will incur some legal costs etc regarding the sale of the property. These are also deductible, further reducing the gain.
On the assumption the gain remains around £30,000, as the property is jointly owned, the the gain is split 50:50 between the two owners, making a gain for each individual of £15,000.
The personal Capital Gains Tax allowance for 2015/16 is £11,100. This means that each individual would pay Capital Gains Tax on £3,900 (£15,000 less £11,100).
Capital Gains Tax is calculated at either 18% or 28%. If the person is a basic rate taxpayer, 18% is the rate used. 28% is used when the person is a higher rate taxpayer.
So, the maximum Capital Gains Tax payable would be around £1,100 per individual.
Do they not get allowance for the time they did live in it??Capital Gains Tax relates to the "Capital Gain" on the property (kind of makes sense). In other words, the tax is charged on the "gain" in the value of the asset between when you bought it and when you sold it.
You bought it for £98,000.
It looks like the total sales proceeds will be £130,000. That gives a basic gain of £32,000.
If you incurred any "enhancement costs" on the property over the years you owned it, these could be added to the original purchase cost, thereby reducing the gain. Enhancement Expenditure is when the owner incurs capital costs on the property, such as major improvements work, extensions etc. Ordinary repairs and maintenance costs do not count.
In addition, you will incur some legal costs etc regarding the sale of the property. These are also deductible, further reducing the gain.
On the assumption the gain remains around £30,000, as the property is jointly owned, the the gain is split 50:50 between the two owners, making a gain for each individual of £15,000.
The personal Capital Gains Tax allowance for 2015/16 is £11,100. This means that each individual would pay Capital Gains Tax on £3,900 (£15,000 less £11,100).
Capital Gains Tax is calculated at either 18% or 28%. If the person is a basic rate taxpayer, 18% is the rate used. 28% is used when the person is a higher rate taxpayer.
So, the maximum Capital Gains Tax payable would be around £1,100 per individual.
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