Capital Gains - House sale
Discussion
Folks
Seeking advice on CGT on an upcoming property sale (not sold property before)
IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
Do you have to submit evidence re the value of the property at the time you move out? ie 2011. If not, what do HMRC use as their data source? Land Registry?
Also, re reasonable costs and improvements taken into consideration, do you have to evidence this with receipts for the works undertaken - not something i can provide from 2000 onwards.
Thanks
Seeking advice on CGT on an upcoming property sale (not sold property before)
IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
Do you have to submit evidence re the value of the property at the time you move out? ie 2011. If not, what do HMRC use as their data source? Land Registry?
Also, re reasonable costs and improvements taken into consideration, do you have to evidence this with receipts for the works undertaken - not something i can provide from 2000 onwards.
Thanks
The system has changed a little, as I'm sure Eric Mc will tell you (IIRC you now submit CGT from property within 30 days of selling or something daft), but I submitted a capital gains last year and you had to submit the figures but not provide the receipts.
I would only be making claims you can back up with evidence though in case HMRC decide to audit your submission for whatever reason, and keep those receipts for as long as possible afterwards (up to 10 years at least).
I would only be making claims you can back up with evidence though in case HMRC decide to audit your submission for whatever reason, and keep those receipts for as long as possible afterwards (up to 10 years at least).
Cgt is worked out based on buying and selling prices, then how much you pay depends on any extra costs during its ownership and percent of time it was primary residence and when it wasn't, so you don't have to work out
/ guess value when you moved out.
So if you bought in 2010, moved out in 2016 and sold in 2020, you need buying price in 2010, selling in 2020 and cgt liability would be payable on 4/10 of the difference, assuming you'd not done any significant work
/ guess value when you moved out.
So if you bought in 2010, moved out in 2016 and sold in 2020, you need buying price in 2010, selling in 2020 and cgt liability would be payable on 4/10 of the difference, assuming you'd not done any significant work
Thanks both
I may have misheard this, however i thought my IFA advised it was the delta between moving out value and selling value that would be considered, rather than original buying price.
i'm awaiting a call from him, to see if the law re aggregating CGT across both partners (we're not married) still stands - if we get married (!). She made a loss this tax year, which could potentially offset my value gain.
I may have misheard this, however i thought my IFA advised it was the delta between moving out value and selling value that would be considered, rather than original buying price.
i'm awaiting a call from him, to see if the law re aggregating CGT across both partners (we're not married) still stands - if we get married (!). She made a loss this tax year, which could potentially offset my value gain.
cornershop said:
Eric Mc said:
Yes - you only have 30 days from exchange of contracts to notify HMRC of the Capital Gain, calculate the liability arising and pay it.
Thanks - is this based on original purchase price, or the value when it no longer became primary residence?AFAIK the value at the time you moved out is of no relevance.
Stage 1 is a normal CGT calculation (selling price minus buying price, less various costs and expenses)
Stage 2 is to divide the gain across all the years/months you've owned it
Stage 3 is to deduct those years/months for which you can claim some sort of exemption
Stage 4 is to see how much taxable gain remains and, if appropriate, deduct your annual CGT allowance of £12,300. The remaining gain will be taxable at your applicable rates(s).
There's useful guidance on HMRC website https://www.gov.uk/tax-sell-home/let-out-part-of-h...
Stage 1 is a normal CGT calculation (selling price minus buying price, less various costs and expenses)
Stage 2 is to divide the gain across all the years/months you've owned it
Stage 3 is to deduct those years/months for which you can claim some sort of exemption
Stage 4 is to see how much taxable gain remains and, if appropriate, deduct your annual CGT allowance of £12,300. The remaining gain will be taxable at your applicable rates(s).
There's useful guidance on HMRC website https://www.gov.uk/tax-sell-home/let-out-part-of-h...
rockin said:
AFAIK the value at the time you moved out is of no relevance.
Stage 1 is a normal CGT calculation (selling price minus buying price, less various costs and expenses)
Stage 2 is to divide the gain across all the years/months you've owned it
Stage 3 is to deduct those years/months for which you can claim some sort of exemption
Stage 4 is to see how much taxable gain remains and, if appropriate, deduct your annual CGT allowance of £12,300. The remaining gain will be taxable at your applicable rates(s).
There's useful guidance on HMRC website https://www.gov.uk/tax-sell-home/let-out-part-of-h...
That's a good summary I reckonStage 1 is a normal CGT calculation (selling price minus buying price, less various costs and expenses)
Stage 2 is to divide the gain across all the years/months you've owned it
Stage 3 is to deduct those years/months for which you can claim some sort of exemption
Stage 4 is to see how much taxable gain remains and, if appropriate, deduct your annual CGT allowance of £12,300. The remaining gain will be taxable at your applicable rates(s).
There's useful guidance on HMRC website https://www.gov.uk/tax-sell-home/let-out-part-of-h...
cornershop said:
Eric Mc said:
Yes - you only have 30 days from exchange of contracts to notify HMRC of the Capital Gain, calculate the liability arising and pay it.
Thanks - is this based on original purchase price, or the value when it no longer became primary residence?Purchase price
Ancillary purchase costs
Enhancement costs during period of ownership
Period in which the property might have been your main residence (you get an allowance for that)
Proceeds on sale
Date of sale
Ancillary costs incurred by the vendor on sale
Your overall income from all sources for the tax year in which the disposal takes place
Capital Gains Tax is not a stand alone tax. The amount you need to pay also takes into account other income such as rental income, self employed profits, salary, dividends, interest received etc etc.
2 sMoKiN bArReLs said:
cornershop said:
Folks
IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
...it looks very much like you should change your IFA!IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
best starting point for the online calculator is:
https://www.tax.service.gov.uk/calculate-your-capi...
effectively - if you have used it as your primary residence then that time doesn't count
the last 18 months doesn't count
you can deduct improvements where relevant
you can deduct selling costs / buying costs
eg buy at 100k
sell at 500k
profit = 400k
lived there for 10 years
empty / rented for 5 years
allowance of 18 months
15 year ownership = 180 months
138 months don't count (10 years + 18 months)
£400k / 180 * 138 = £306,667 not taxable
= £400k - £306,667 = £93,333 taxable benefit
simplistic calculations - you obviously also deduct buying / selling / improvement costs as well all of which helps...
https://www.tax.service.gov.uk/calculate-your-capi...
effectively - if you have used it as your primary residence then that time doesn't count
the last 18 months doesn't count
you can deduct improvements where relevant
you can deduct selling costs / buying costs
eg buy at 100k
sell at 500k
profit = 400k
lived there for 10 years
empty / rented for 5 years
allowance of 18 months
15 year ownership = 180 months
138 months don't count (10 years + 18 months)
£400k / 180 * 138 = £306,667 not taxable
= £400k - £306,667 = £93,333 taxable benefit
simplistic calculations - you obviously also deduct buying / selling / improvement costs as well all of which helps...
First you calculate the gain.
Then you calculate the tax on the gain.
Calculating the gain early in a tax year to comply with the 30 day rule mains that it is pretty certain that your calculation will not be correct. You will need to submit another calculation when the tax year is over to correct the errors.
Then you calculate the tax on the gain.
Calculating the gain early in a tax year to comply with the 30 day rule mains that it is pretty certain that your calculation will not be correct. You will need to submit another calculation when the tax year is over to correct the errors.
2 sMoKiN bArReLs said:
cornershop said:
Folks
IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
...it looks very much like you should change your IFA!IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
The calcs he came back with today show I misheard him. He has considered the delta between purchase and selling prices and the time I didn’t live there (9 out of 20 years).
cornershop said:
2 sMoKiN bArReLs said:
cornershop said:
Folks
IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
...it looks very much like you should change your IFA!IFA advises CGT is based on value increase from point of property no longer being my main residence to the selling value (minus PT allowance, buying/selling fees, improvements etc).
The calcs he came back with today show I misheard him. He has considered the delta between purchase and selling prices and the time I didn’t live there (9 out of 20 years).
What you do is include the CGT calculations again when completing your Self Assessment tax return - so, in effect, you do it properly. Any under or over payments made when providing the original CGT submission will be automatically included the Self Assessment tax calculation.
I am not sure what HMRC plans to do regarding interest charges (or credits) on under or over CGT payments.
I am also not sure how these post tax year end corrections will be dealt with when Self Assessment is abolished - which is likely around 2022 or 2023.
I am not sure what HMRC plans to do regarding interest charges (or credits) on under or over CGT payments.
I am also not sure how these post tax year end corrections will be dealt with when Self Assessment is abolished - which is likely around 2022 or 2023.
Eric Mc said:
Calculating the gain early in a tax year to comply with the 30 day rule mains that it is pretty certain that your calculation will not be correct. You will need to submit another calculation when the tax year is over to correct the errors.
Why would it be inaccurate if nothing else changes ref CGT in the year?the figures for the house calculation will not have changed, and if you have any other CG, then you simply use what is left of your allowance if any, and pay tax on the rest...
or is that too simplistic?
akirk said:
Why would it be inaccurate if nothing else changes ref CGT in the year?
the figures for the house calculation will not have changed, and if you have any other CG, then you simply use what is left of your allowance if any, and pay tax on the rest... or is that too simplistic?
Saving Eric's typing finger, and as I asked a similar question quite recently that he kindly answered, there's the fact your final CGT bill can vary depending upon your precise INCOME for the year. the figures for the house calculation will not have changed, and if you have any other CG, then you simply use what is left of your allowance if any, and pay tax on the rest... or is that too simplistic?
Whilst this sounds counter-intuitive, CGT rates on a house sale are either 18% or 28% depending on whether you're a basic rate taxpayer or a higher rate taxpayer, and if your situation straddles the line you'll pay some CGT at each rate - but won't know where that dividing line falls until after the end of the financial year.
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