Capital Gains - Have I got it right?

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
I think I have this right, but are there any experts out there to cast an eye of my process. (House purchased in April 1987).

Sale Proceeds less purchase cost gives unindexed gain.

Less indexation allowance on cost.

Less sale costs.

Leaves chargeable gain subject to taper relief.

Taper relief at -%.

Less main residence relief (7 years out of 20)

Net Chargeable gain

Less tax free allowance

Equals Taxable Gain.


Thanks.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?

    The sale costs are normally deducted before indexation allowance is granted to give you a pre-indexed gain (i.e. sale proceeds less allowable costs inc. incidental costs). PPR relief is granted prior to taper relief. Taper relief applies to gains after all deductions and before the annual exemption.

    With regard to PPR relief, I take it the 7 years out of 20 also includes the last 36 months of ownership. The last 3 years of ownership always qualify for PPR.

    Kind regards
    Steve

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?

    No, the 7 years related to the first seven years of ownership. It was then let for the next 13 before it was sold.
    So I should have taken off the costs before indexation and then the PPR relief before taper relief.
    Does that sound correct?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?

    The first seven years qualify for private residence relief and the final 3 years of ownership always do - so ten years in total. Therefore 10/20ths would qualify for PPR.

    The normal capital gains calculation is:

    Disposal Proceeds
    Less
    Allowable Costs (multiplied by the indexaction factor if cost incurred before April 1998, which in your case it does)
    Gives
    Your gain (after indexation) or your allowable loss

    So yes, you are right in your thread above.

    Taper relief is always given after all reliefs and deductions and before applying the personal allowance.

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?

    Thank you so much for your help. It has been much appreciated. TC
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?
    peugeot wrote:
    Gives
    Your gain (after indexation) or your allowable loss

    Although IA cannot create a loss, only reduce a gain to zero.

    Hope you don't mind me adding that Ste. Although, i'm sure that's what you meant with the placing of your wording.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?

    Absolutely not. That's what I meant in fact "Allowable" loss. Sometimes my "everdyay" technical language can override technically correct language!

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?

    Steve is your boss away? How quick was that reply :lol:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Capital Gains - Have I got it right?

    I AM the boss!!

    Well that's what I tell him anyway!! :lol:

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