Property- Capital gains advice
Discussion
Hi, I am thinking of selling a property bought approx 15 yrs ago for 50K now valued at 170 K. what would be my capital gains liability if i sold for this amount, would it be the full 40% or will tapering relief apply?. I've heard that CGT will change to 18% next year so may wait until next year if the sums work out better....
thanks for any advice .
thanks for any advice .
As has been mentioned, no CGT applies at all if it IS your main residence.
Relief will also be obtained if it WAS your main residence during a period of your ownership.
As you have owned it since 1992, Indexation will apply to that element of the gain relating to the period from the date of purchase to 5 April 1998. Taper Relief relates to that part of the gain between 6 April 1998 and the date of sale.
If you sell before 6 April 2008, Indexation and Taper relief will be available - although the resultant gain will be taxed at your highest rate of personal tax - usually 40%.
If you sell after 5 April 2008, Indexation and Taper Relief WILL NOT APPLY and you will be taxed on the ENTIRE gain from the date of purchase to the date of sale. However, the maximum tax you will pay will be 18% of the gain.
There will be some winners and some losers under the new rules. The basic guide is that the longer you have held the asset, the more likely you are to lose out with the abolition of Indexation and Taper Relief.
Relief will also be obtained if it WAS your main residence during a period of your ownership.
As you have owned it since 1992, Indexation will apply to that element of the gain relating to the period from the date of purchase to 5 April 1998. Taper Relief relates to that part of the gain between 6 April 1998 and the date of sale.
If you sell before 6 April 2008, Indexation and Taper relief will be available - although the resultant gain will be taxed at your highest rate of personal tax - usually 40%.
If you sell after 5 April 2008, Indexation and Taper Relief WILL NOT APPLY and you will be taxed on the ENTIRE gain from the date of purchase to the date of sale. However, the maximum tax you will pay will be 18% of the gain.
There will be some winners and some losers under the new rules. The basic guide is that the longer you have held the asset, the more likely you are to lose out with the abolition of Indexation and Taper Relief.
Indexation runs from the date of purchsase to 5 April 1998. It is based on the monthly Retail Price Index figures during that period. You should be able to obtain these RPI amounts from the Revenue Website.
Taper Relief is simpler in that it is a set of fixed percentages based on the number of full years you owned the property after 6 April 1998.
Taper Relief is simpler in that it is a set of fixed percentages based on the number of full years you owned the property after 6 April 1998.
You state you purchased the property for 50k 15 years ago, and that you have never used the property as your main place of residence during this period.
Well first you need to calculate your costs for purchasing the property, these costs may include legal, stamp duty etc. etc., for simplicity and to set out an example of a calculation for CGT purposes I am going to calculate £2k for the same.
Then you need to calculate your costs for selling the property, these costs may include any costs you have incurred to sale the same, legal costs, estate agents fees, advertising costs, carpets for presentation etc. etc., and again for the above reasons I am going to calculate those costs to be £10k.
Now one needs to calculate the indexation allowance, this varying on not only the year, but also the month you purchased the property. You say 15 years ago, so then 1992, which from January to December 1992 will give an indexation rate difference of between 0.199 for the former to 0.168 for December. Again for the purpose of creating a calculation I will use the December 1992 figure of 0.168. Then to calculate the indexation allowance you need to multiply the purchase price 50k by 0.168 giving you £8400.00.
Taper Relief, the maximum number of years one can claim for is 10 years, and the % of Gain taxable for the same is 60%.
So you have;
Selling Price 170,000
Less;
Purchase Price 50,000
Costs Purchase 2,000
Costs Selling 10,000
Indexation 8,400
70,400
Gain before Taper Relief 99,600
Taxable Gain = 60% 0f 99,600 = 59,760.00
After April 2008 the taxable
gain will be 18% of 108,000 = 88,560.00
Working out tax on the above two calculations entails deducting personal capital gains allowance £9,200 (£18,400 if property in joint names with wife), so in the former £50560.00 x 40% = £20,224.00 tax payable (£16,544.00), and in the case of the latter £79,360.00 x 40% = £31,743.00 tax payable (£28,064.00)
You have 3 years to roll over paying Capital Gains Tax ie into a new commercial venture, investment trusts etc.
Well first you need to calculate your costs for purchasing the property, these costs may include legal, stamp duty etc. etc., for simplicity and to set out an example of a calculation for CGT purposes I am going to calculate £2k for the same.
Then you need to calculate your costs for selling the property, these costs may include any costs you have incurred to sale the same, legal costs, estate agents fees, advertising costs, carpets for presentation etc. etc., and again for the above reasons I am going to calculate those costs to be £10k.
Now one needs to calculate the indexation allowance, this varying on not only the year, but also the month you purchased the property. You say 15 years ago, so then 1992, which from January to December 1992 will give an indexation rate difference of between 0.199 for the former to 0.168 for December. Again for the purpose of creating a calculation I will use the December 1992 figure of 0.168. Then to calculate the indexation allowance you need to multiply the purchase price 50k by 0.168 giving you £8400.00.
Taper Relief, the maximum number of years one can claim for is 10 years, and the % of Gain taxable for the same is 60%.
So you have;
Selling Price 170,000
Less;
Purchase Price 50,000
Costs Purchase 2,000
Costs Selling 10,000
Indexation 8,400
70,400
Gain before Taper Relief 99,600
Taxable Gain = 60% 0f 99,600 = 59,760.00
After April 2008 the taxable
gain will be 18% of 108,000 = 88,560.00
Working out tax on the above two calculations entails deducting personal capital gains allowance £9,200 (£18,400 if property in joint names with wife), so in the former £50560.00 x 40% = £20,224.00 tax payable (£16,544.00), and in the case of the latter £79,360.00 x 40% = £31,743.00 tax payable (£28,064.00)
You have 3 years to roll over paying Capital Gains Tax ie into a new commercial venture, investment trusts etc.
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