Capital Gain tax

hsodhih

House 1 bought in 1996 for £39,000.
House 1 value now £110,000
House 1 Mortgage outstanding now £35,000

House 2 bought in 2005 for £145,000
House 2 Value now £160,000
House 2 mortgage outstanding £115,000

House 1 was main residence till house 2 bought.
House 1 was vacant till May 2010 (now on rent £500 per month), could not get tenant so used as storage of personal stuff.
Did not nominate any particular house as main residence with HMRC
House 1 was re-mortgaged to put deposit on house 2


Say if husband and wife own both properties jointly 50% each,
What would the capital gain be to sell house 1 for £110,000 and how are calculations done?
What would the capital gain be to sell house 2 for £160,000 and how are calculations done?

Thank you

T.C.

If you have any of the tax guide books they will guide you through the methods to calculate capital gains tax.

Anne Boleyn

Cgt

Hi hsodhih

I think you'll get more responses if you put your own calculations in and ask for confirmation of your workings rather than just asking others to do your work.

hsodhih

Sorry, I was trying to get some blanks filled in and ensure that my calculations were right. Will post my calculations.

Vonni

You would be best to hold each property in joint names as this will entitle you to an exempt gain of £10,100 per person. Ensure this is in place before you dispose of the asset - you will find that your mortgage lender will ask for a fee if the mortgage is not already in joint names and in addition there will be legal costs - so ensure that these do not exceed the tax saving you are hoping to make on this transfer. Additionally you will need to review the tax bracket that each owner falls in to as the higher CGT tax rate of 28% now applies, following the emergency budget! If possible also dispose of the assets in 2 seperate tax years to maximise your exemptions as these are annual exemption. So planning is essential.

Regarding your main residence - house number 1 - how long was this rented out for you may find that moving back in before disposal will remove most of the capital gain - as this is where the biggest chargable gain would appear to be? Look at your records to check you can prove that it was the main residence for a substantial number of years of ownership - also why did you rent it out was it because you were working or living out of the UK or living in job related accommodation? Think it all through and do some tax planning before you dispose of anything.

Finally don't forget you can offset any legal and professional costs of both buying and selling the property ie. solicitors costs or estate agents fees - these will reduce the gain and the tax bill.

Y




The gain is calculated by taking the sales proceeds less the cost price and any

DavidSanders

A bit of an extension to the above question, if the house were bought in 1988 would you apply indexation and taper relief (1998-2008=40%) and then the 2010 allowance?

Or as both indexation and taper relief was scrapped you would not use them, and just the new allowance?