Property CGT

[sbk1972]

Hi all,

Wife is selling her house to pay for school fees. Owned it for 21 years, lived in it for 16 years, rented for 5.

Im trying to working out the CG liabilties and having a bit of a nightmare. Does anyone have a spreadsheet / calculation webpage to use ? Obviously from the gain you subtract buying / selling costs, renovation costs, etc. However the months rented vs months lived is confusing especially around the 9/18 month before selling relief.

Also, we were trying to sell the house back in Feb but Covid took over. This means we've gone past the 2020 April change. Has this come into force ? Is there Covid induce delay ?

Hoping to get some help from you clever guys

SBK

[akirk]

sbk1972 said:

Hi all,

Wife is selling her house to pay for school fees. Owned it for 21 years, lived in it for 16 years, rented for 5.

Im trying to working out the CG liabilties and having a bit of a nightmare. Does anyone have a spreadsheet / calculation webpage to use ? Obviously from the gain you subtract buying / selling costs, renovation costs, etc. However the months rented vs months lived is confusing especially around the 9/18 month before selling relief.

Also, we were trying to sell the house back in Feb but Covid took over. This means we've gone past the 2020 April change. Has this come into force ? Is there Covid induce delay ?

Hoping to get some help from you clever guys

SBK

https://www.gov.uk/tax-sell-property/work-out-your-gain

should give you all you need to know - bear in mind that you can also offset purchase / sales costs plus relevant improvement costs - if unsure, an accountant may be the best next step

[Eric Mc]

And she has 30 days to submit the calculations and pay the CGT after the sale.

[sbk1972]

Hi all,

Thanks for the help above. Okay I think Im getting confused with letting relief and personal property relief. There seems to be a limit on Letting relief, so which ever is the lowest PPR or £40K. This isnt the case with PPR as my wife never rented whilst living there.

So Ive worked out costs, my PPR and I now have an end figure. Lets say £40,000 The docs mentions a personal tax figure of £12,300 and whether the seller is a lower or high rate tax payer. This is where I get confused now. I see 28% beining mentioned so can I subtract 12300 from the 40K, then 28% of that I pay for CGT ?

[uknick]

sbk1972 said:

Hi all,

Thanks for the help above. Okay I think Im getting confused with letting relief and personal property relief. There seems to be a limit on Letting relief, so which ever is the lowest PPR or £40K. This isnt the case with PPR as my wife never rented whilst living there.

So Ive worked out costs, my PPR and I now have an end figure. Lets say £40,000 The docs mentions a personal tax figure of £12,300 and whether the seller is a lower or high rate tax payer. This is where I get confused now. I see 28% beining mentioned so can I subtract 12300 from the 40K, then 28% of that I pay for CGT ?

I hope the following is clear, but if not have a look at this link to see where the numbers come from;

https://www.gov.uk/government/publications/rates-a...

It is complicated because you are having to deal with 2 taxes, income and capital gains, in one calculation.

I'm going to assume you don't live in Scotland as their rates are different.

When you've worked out the gain, £40,000, deduct the annual allowance of £12,300 to arrive at a taxable gain of £27,700.

Then, you need to look at her marginal income tax rate, i.e. what is the highest rate she pays income tax at, 20%, 40% or 45%?

Say her taxable income is £40,000 before her personal income tax allowance of £12,500 meaning the highest income tax rate she pays is 20% on £27,500 (£40,000 less £12,500). As she can earn up to £37,500 (£50,000 less £12,500) after her income tax allowance this means she has £10,000 left at the 20% rate.

Therefore, the first £10,000 of the taxable gain uses up the remainder of the 20% tax band so is taxed at 18%. The remaining £17,700 is taxed at 28%

However, if she earns nothing (meaning she hasn't used any of her £12,500 personal allowance) then she has all the 20% income tax band of £50,000 available, so the gain is all taxed at 18% as the £27,700 is less than £50,000.

But, if she earns say, £75k, then she has no 20% band left so all the gain is taxed at 28%.

[Eric Mc]

And a reminder - you have 30 days to do all this - even if you don't know for sure what the rest of your non-CGT income is for the remainder of the tax year.

[sbk1972]

Cheers guys, you've all been a tremendous help.

Ive now got a far better handle on the situation.

Owe you all a virtual beer.

Thanks

SBK