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| *Loan,banking and credit>>>tax advice |
Really need some advice on Capital Gains Tax on the sale of a second property, can you help?? |
Before I married my wife she lived in her own little house that she brought fora humble 拢97000 in 2001. She moved in with me in 2003 but didn't want to sell the house incase things didn't work out, she rented it out to a friend to cover the mortgage. We brought a flat together last June and now she is selling her house. She has accepted 拢140500, does anyone now how Capital Gains Tax she will have to pay and if there are any ways that we could get the payment down? as you may know the sale of your principal private residence is exempt from capital gains tax (CGT). Technically the little house was your wife's PPR up until she moved in with you. Any gain in the property up until this point is expempt. If the proprty grew in value at a steady rate since 2001. Calculate the gain over the period from purchase to sale and then deduct the gain in the period to move out date in 2003. The remaining gain is chargeable against which annual exemptions can be set to find the taxable gain. If alternatively the properties value grew the quickest between 2001 and 2003. Get a valuation of the property back in 2003 and then chargeable gain is the growth from this value against which annual exemptions can be set to find the taxable gain. I understood that capital gains tax stood at 40%. I think one way round it is for someone from your family to live there for 12 months. BUT you should seek professional advice on this. My knowledge of taxable gains is not 100% but as far as im concerned, she will have an allowance per year she had the house for ie 5% of the original value, so for every year she kept the house on she wouldnt pay tax on the first 5% of the gain and so on. The above figures are just examples, the % may vary from provider to provider and plan to plan, but the provider will send her a Gains cert on what will be taxable and it will be up to Inland rev I own lots of houses and I won't Capital Gains on any of them, three months before they sell I move back (technically) its my main residence therefore no capital gains. There is no Capital Gains on a main residence. When you sell a property you say its your main residence. Unless of course you want to give the government 40% 40% on the calculated gain. Add all initial capital related costs to the purchase price Add cost of any subsequent extentions etc Deduct capital costs from sale price. You may be able to reduce the resulting difference by the standard inflation factor between the two relevant dates Look up the full rules on the web and, if not sure visi Citizen's Advice as well Think Ms Mortgage could come unstuck ( TCGA 1992 s222(5)(6) ) but that isnt the question asked! LOL Your wife's property was her principle private residence until she moved out whenever in 2003 (you dont say when.) Provided the above applies the last 3 years of ownership are always exempt in calculating CGT. You also have up to 2 years (from purchase) to notify the HMRC if you have 2 homes which you would like to be seen as your main residence. If there is a gap of more than 3 years between moving out and now, part of the chargeable gain will be taxable but there is also a lettings exemption that may apply and of course your CGT annual exemption to take off the chargable gain. Costs such as solicitors costs can be deducted from the procceds as can any capital improvements (new roof, windows etc) as long as they were not claimed as revenue expenditure while the property was let. Suggest if she cant calculate herself, an accountant would be advisable. Tax experience |
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