Tax on a property

[Newky Brown]

Hi,

Could anyone please advise on how much tax would be due in the following scenario.

In 2004 I was gifted a house (valued at £135k at the time) by a relative who continued to live there. In 2010 they passed away, the house was including back into the estate for IHT due to the 7yr rule but the overall estate value was below the threshold. The value of the property at that time was around £145k.

I then renovated the property and moved into it for 5yrs after which it's rented out.

If I sell the property now, value around £190k, how much tax is liable? Alternatively, if I move back in for 2 years, would this tax amount reduce at all?

[anonymous-user]

Newky Brown said:

Hi,

Could anyone please advise on how much tax would be due in the following scenario.

In 2004 I was gifted a house (valued at £135k at the time) by a relative who continued to live there. In 2010 they passed away, the house was including back into the estate for IHT due to the 7yr rule but the overall estate value was below the threshold. The value of the property at that time was around £145k.

I then renovated the property and moved into it for 5yrs after which it's rented out.

If I sell the property now, value around £190k, how much tax is liable? Alternatively, if I move back in for 2 years, would this tax amount reduce at all?

if it was passed to you after the bereavement then that is irrelevant now, the value then is the starting figure for CGT.

The time you lived in it as your primary residence doesn accrue any CGT, just the time it was rented, the CGT is then pro rated, with an 18 month allownace added, so assuming you lived in it for 5 years and rented it for 3 then the CGT payable would be on 3/8 of the increased value minus the 18 month allowance, subject to any reductions for major works (loft conversions etc)

So in fact would I think be 1.5/8,

then take into account your annyal cgt allowance of £11.5k.

so it really comes down to how long did you live in it compared with how long it was rented out for

[Eric Mc]

The 18 month additional period of grace is being halved on 6 April 2020. So, selling before 5 April 2020 will save you quite a bit of tax.

[Newky Brown]

Thank you for your replies.

So is the starting figure for CGT £145K?

If so, my terrble maths makes it £190-£145K = 45K ~ 3/8 = £16'875 - £11.5K = £5'375. Would this be the amount i pay or a % of it based upon my income tax rate? As a higher rate payer i will pay more?

I also spent around £6-7K on double glazing, carpets, and central heating.

[Eric Mc]

Newky Brown said:

Thank you for your replies.

So is the starting figure for CGT £145K?

If so, my terrble maths makes it £190-£145K = 45K ~ 3/8 = £16'875 - £11.5K = £5'375. Would this be the amount i pay or a % of it based upon my income tax rate? As a higher rate payer i will pay more?

I also spent around £6-7K on double glazing, carpets, and central heating.

It's a bit cheeky to ask people to do the maths for you.

However, I will point out that the personal Capital Gains Tax allowance is actually £12,000, not £11,500.

Also, there are special rates of Capital Gains Tax - they do not use your personal Income Tax rates. The basic rate of Capital Gains Tax on residential property sales is 18% and the higher rate is 28%. Whether you pay 18% or 28% depends on how much of the gain falls into your higher rate tax band. This is dictated by combining your gross income from all sources including the taxable gain..

[Newky Brown]

Thanks but I think you'll find I've done the maths and asked if it was right or wrong.

[Eric Mc]

Newky Brown said:

Thanks but I think you'll find I've done the maths and asked if it was right or wrong.

Which involves someone doing the calculations themselves. You are wrong, by the way - as I have already pointed out.

There is also another allowance you should be entitled to which would probably wipe out any gain. That allowance is also going on 6 April 2020 - so better get a move on.

[Newky Brown]

Eric Mc said:

Newky Brown said:

Thanks but I think you'll find I've done the maths and asked if it was right or wrong.

Which involves someone doing the calculations themselves. You are wrong, by the way - as I have already pointed out.

There is also another allowance you should be entitled to which would probably wipe out any gain. That allowance is also going on 6 April 2020 - so better get a move on.

Well how else would they give advice?? Yes, I'm wrong, I'll not bother again

[Croutons]

Newky Brown said:

Well how else would they give advice??

Normally by charging for it.

[anonymous-user]

Ouch !!!

[Newky Brown]

Ouch? You must be easily offended.

[The Moose]

Eric Mc said:

There is also another allowance you should be entitled to which would probably wipe out any gain. That allowance is also going on 6 April 2020 - so better get a move on.

Out of interest, which allowance is this?

[996c2]

£40k of Letting relief?

https://www.rrlcornwall.co.uk/articles/tax-blog/ho...

[Eric Mc]

Yes - but it is going to be extremely restricted ad and from 6 April and most owners will not qualify for it under these much tighter rules.

[Alpinestars]

Newky Brown said:

Thank you for your replies.

So is the starting figure for CGT £145K?

If so, my terrble maths makes it £190-£145K = 45K ~ 3/8 = £16'875 - £11.5K = £5'375. Would this be the amount i pay or a % of it based upon my income tax rate? As a higher rate payer i will pay more?

I also spent around £6-7K on double glazing, carpets, and central heating.

Formatting is rubbish, but here’s the calculation:


Proceeds 190
Cost. (145)

Gain. 45

PPR
Actual 5/9. (25)
Last 18m (7.5)

Gain before
Letting relief. 12.5

LR: lower of
PPR (32.5)
40k
The gain in the period it’s let for (4y less 18 months you got PPR for), ie 2.5/9*45 = 12.5
Ie, letting relief is (12.5)

Net gain. NIL