Capital Gains Tax

jayjay

Hi
Please tell me where to put 'Redemption of the outstanding mortgages' in the capital gains computations? I told it's not includes of incidental cost.
Redemption of the mortgages is a cost, this just can't be ignore.
Thank you in advance.

Bluewednesday

The figure for the original mortgage is in the original cost!

Vonni

Jay Jay

If you dispose of an asset and make a capital gain the outstanding debt attached to that gain has nothing at all to do with the CGT computation.

You are merely working out the difference of the proceeds of sale less less cost of acquisition, reducing the resulting gain by the legal & professional costs incurred and any capital expenditure not allowable as a business expense so not already claimed - deducting the exempt proportion and calculating the tax due.

I'm assuming here that you are talking about a rental property - so if there is a resulting interest charge on redemption of the loan then this cost may be offset against the rental income in the year of disposal - but obviously not the capital element.

At the end of the day - you borrow some money to buy a property and you can claim the interest cost on this loan against resulting income from the property but ultimately it is up to you to pay back any loan outstanding plus the tax on any capital gain that you may make.

Hope that helps?

Vonni