Captal Gains Tax

[jaycee401]

does anyone know if i would have to pay any CGT, its a second property, been rented out for a few years. Bought for £100k sold for £150k. I lived in it for 18 month before renting it out. I know I can deduct estate agent and solicitor fees, they have come to around £3k.Many thanks. Not sure what the tax allowance is and I have heard something about tax relief if you lived in property at any time.

[mazie]

I think if it's been rented out for over 2 years tax does apply . I would visit the HMRC website Jaycee

[jaycee401]

Thanks Mazie I have been looking at HMRC and trying to work out what I would have to pay, but its so complicated.

[buildersmate]

Oh yes, it's complicated alright - that's how tax advisors make their fees.
You need to search for HMRC Helpsheet HS283 on their website, read and inwardly digest. There are plenty of examples provided on how things work.
The final 36 months of your ownership will not normally count in terms of capital gain in that period. This is good, because property prices have kicked off again in the last couple of years. However the period between when it ceased to be your principal private residence, and 36 months ago will require a CGT assessment. To do that you may well have to employ a valued to advise you as HMRC May not just accept a random figure you might generate for the two valuations. The difference between the two is your net gain, from which you can deduct your personal CGT allowance for around £11k, unless you have any other gains in this tax year.
Having deducted your allowance, you are due to pay tax at 28% on any positive residue, unless you are a higher rate taxpayer, when the rate is higher.

[buildersmate]

Valuer, not valued, damn that predictive text

[jaycee401]

been to see an accountant today, he said cos I bought the property from an ex at an undervalue I need to ask the solicitor who dealt with the purchase what the value at acquisition was. As I was then a common law partner. I know the property was valued at £130k when I bought it, so he said if the solicitor confirms my legal position as common law wife when I bought it then we could use the £130 figure so there would be no CGT. Does this make sense to anyone??

[buildersmate]

Solicitors don't have a clue as to the value of property.
Chartered surveyors (RICS) do - its their job. I said chartered surveyors - not estate agents who by and large are just salespeople (some estate agents are RICS-qualified).
They then use property tables to assess what the market value would be at any particular back-dated point(s) that align to the period of time over which you have potential capital gain that may be taxable.

If that's all the accountant said, then that's not much - I gave you far more accurate and specific advice about how this works under HMRC rules in my first post. And I'm not even a chartered accountant.

[jaycee401]

Thanks BM. Believe me i am no Arthur Daley. I never wanted to rent the prop it was circumstances!

[buildersmate]

No, Methyl, you are being far too simplistic. Go back to my original response. The final 36 months of ownership of a second property do not count in any assessment of a capital gain, provided the owner lived in it as a main residence at some earlier point in time.
So to assess whether any CG has occurred, one has to have a valuer to project back what appropriate valuations would have been at the relevant dates.
From any gain made, the OP can deduct her annual CGT allowance.
So no tax may be due.

[jaycee401]

Thanks again BM. I have the original survey report at the time I purchased it and it was valued at £130k. I have heard that the 36 months had reduced to 18 months :(

[Peter Pedant]

This has a bit about undervalue and CGT
http://www.gillespieandanderson.co.uk/cms/filelibrary/Key_features_of_capital_gains_tax.pdf

Thing is - if you bought it undervalued - 100k and it was worth 120 k
then you save money on the CGT transaction - instead of a chargeable gain of 50k it is only 30k

and you ex's disposal is tax free anyway

perhaps BM can comment.

In terms of the year of the tax return where this gain is charged it is worth asking/paying a tax consultant to fill out the form -as they can then agree the transaction with the tax man

[Peter Pedant]

thanks for the ref BM

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323679/hs283.pdf

and jaycee example 9 seems to cover you

[jaycee401]

Thanks! Much appreciated.