View Full Version : Anybody understand Capital Gains Tax?
A few years ago, I thought about selling my other house. Did a quick calculation at the time (using IR283) - and it seemed CGT would be around the £3-5K mark (I'd lived in the house for the first year, last 3 years got relief, and the house had increased from £51K to £120K in 15 years).
However - yesterday I accepted an offer for £134K. When I do a rough calculation my CGT is in the £20-25K region so I sincerely hope I'm doing it wrong! I know there is an allowance (£8.5k - yippee...) and I think I might be allowed other allowances (taper relief?) but not sure.
I think I may have to use an accountant for my tax return this year - a £25K tax bill is going to piss me off big time.
That wouldn't surprise me Dave. I don't know the facts but my dad is a manager at Natwest and he says that CGT is worse than Leprosy!!
I'll try to find out more from him!!
H.
£8500 sounds correct to me.
markjodrell
24-01-07, 23:06
A few years ago, I thought about selling my other house. Did a quick calculation at the time (using IR283) - and it seemed CGT would be around the £3-5K mark (I'd lived in the house for the first year, last 3 years got relief, and the house had increased from £51K to £120K in 15 years).
However - yesterday I accepted an offer for £134K. When I do a rough calculation my CGT is in the £20-25K region so I sincerely hope I'm doing it wrong! I know there is an allowance (£8.5k - yippee...) and I think I might be allowed other allowances (taper relief?) but not sure.
I think I may have to use an accountant for my tax return this year - a £25K tax bill is going to piss me off big time.
Right how I understand it is this.
You inherit a house for example . it is valued at 50k , some years later you decide to sell it the new value being 150k again for example.
You deduct the original value when you aquired the property, in this case leaving 100k .That is then taxed at 40%. The tax bill would be 40k
Day light fucking robbery , this tax is ALMOST as unfair as Inheritance tax which is legal theft by the goverment
The issue is that its your second house, from my understanding your primary residence/home is exempt from CGT.
You deduct the original value when you aquired the property, in this case leaving 100k .That is then taxed at 40%. The tax bill would be 40k
40K minus the £8500 allowance I think.
markjodrell
24-01-07, 23:09
if you have 8.5k allowance I reckon your tax bill will be about £24,500 :( :( :(
markjodrell
24-01-07, 23:11
The issue is that its your second house, from my understanding your primary residence/home is exempt from CGT.
Thats correct, only on a secondary home as that is seen as an investment /money maker which is subject to taxation
Is the house in just your name, as each person is allowed the allowance so if its a shared property you could maybe get £17k allowance.
Have you got another half?? Get your missus to buy your second house or transfer it into her name. She has to look as if she's living in it for 12 months and then sell it. Voila no CGT.
Just htink in another 12 months the house will have increased in price also.!!
She would also have to give up her half of you current property though.
There is no way I would pay £24,500 to the taxman. They would have to pull it out of my "still twitching hand"!!
Cnuts
H.
It's just in my name. It is more complicated than just : profit - annual allowance though.
Because I lived there as my only residence for a while that period is free from tax. The last 3 years is also free from tax it seems. Then there is an indexing allowance (up to 1998) I think and taper allowance after 1998. Not quite sure how they work - I think the taper allowance suggests that only 70% of the remaining gain is taxable. Not sure though.
I'm sure that when I worked it out a few years ago, the allowance could be doubled because I'd lived there - but I can't find anything about that now.
Hmm, sounds like it could get messy and if you are not careful the tax man will take too much.
Why is the last 3 years free from tax?
Hmm, sounds like it could get messy and if you are not careful the tax man will take too much.
Why is the last 3 years free from tax?
No idea - it just is according to IR283. Benefit of having lived there.
Do you need all the money from the sale, if not there maybe a way to invest a portion of it which would mean that portion is exempt from tax, just a thought.
I'm going to be in the same situation in a few years (not too soon I hope).
When my Dad died he left the house to us three offspring with the proviso that Mum can live there as long as she wishes. The house was valued at £300k at the time but we've since had an offer for £600k.
Looks like we're in for a big tax bill when we finally sell...
Any way around this apart from the £8.5k each allowance?
Yes have one member of your family take ownership of the house and class it as a primary residance for I think min 12 months, there would be no CGT on your primary residence.
markjodrell
25-01-07, 00:03
I'm going to be in the same situation in a few years (not too soon I hope).
When my Dad died he left the house to us three offspring with the proviso that Mum can live there as long as she wishes. The house was valued at £300k at the time but we've since had an offer for £600k.
Looks like we're in for a big tax bill when we finally sell...
Any way around this apart from the £8.5k each allowance?
That will not be cgt but inheritance tax. So £285,000 allowance before inheritance tax then the rest taxed at 40%
Would inheritance only be payable if you sold it straight away?
If you or a spouse lived there for 12 months and made it your primary residance it should surely be free of any taxes.
markjodrell
25-01-07, 00:17
Would inheritance only be payable if you sold it straight away?
If you or a spouse lived there for 12 months and made it your primary residance it should surely be free of any taxes.
No, the chanceller wants it straight away.
This is why you see the heart break stories of people having to sell the property just to pay the tax. If you dont have sufficient funds to cover the tax bill the selling of the house is the only option
ANY political party that were to scrap inheritance tax would get in at the next election due to it affecting sooo many ordinary people. It was originally meant to skim some wealth from folks who inhertited vast industrial wealth, not any more. £285k how many houses in the UK are worth than alone ?????
Gordon Brown is funamentally against people gaining wealth through inheritance, beware .
The people of this country give in and accept everything thrown at them, about time we said enough is enough
rant over
I can't say I know many people who actually *pay* CGT.
Poor bastids are not caught, and rich ones know how (and when) to sidestep it.
It is the 'middle classes' that are caught in droves because they just winge and can't be arsed to ask the right questions - or (sin of sins!) question authority.
Stamp duty is another example.
Do some homework...
By my understanding, the house was left to you and your siblings some time ago, as part of your father's estate. Any iht due would and should have been paid in the year following the estate settlement. The subsequent period, when occupied by your mother, but owned by you and your siblings would be the period where cgt would kick in. However each of the owners is entitled to their allowances i.e. allowances x 3. Also allowances would be due based on inflation and rpi.
Rgds
Paul
CGT & Inheritance Tax is criminal imo. I can't really offer any advice Dave, other than perhaps sell the property where you live now?
Then move back to your second home for 12 months and then sell that? In no way ideal but better than paying £24k for feck all.
Me and my old man are builders. Pretty much every year my Dad will build a house, live in it for a year and then sell it on for a profit - tax free. You gotta take everything you can! :eyebrows: ;)
I'm going to try to work it out properly at the weekend (although I will probably also talk to an accountant at some point). I am fairly sure I can apply tapering - and maybe indexing too - so I need to see what difference they make. I reckon £10K or less I'm happy, more than £10K I'm not happy!
....Me and my old man are builders. Pretty much every year my Dad will build a house, live in it for a year and then sell it on for a profit - tax free. You gotta take everything you can! :eyebrows: ;)
Yep, that's one of the low-tech ways to sidestep it.;)
There are more convenient ways though, and don't believe the lies that only those born outside these shores are eligible.:sly:
I've found a hi-tech way. I ordered some s/w that - apparently - will apply all my allowances, and work out the bill. Should turn up in the next few days and I am hoping it will tell me my actual CGT bill will be 50p.......
Right boys....never fever an accountant is here......but i'm knackered so i'll answer the question tommorow morning for in full when i can actually connect what my eyes are seeing to my brain.
Apologies its accountants busy season and i've just averaged 15hrs a day for the period of January. :(
Cheers
G
Right boys....never fever an accountant is here......
How exactly can an accountant help with health problems?
Yep, that's one of the low-tech ways to sidestep it.;)
There are more convenient ways though, and don't believe the lies that only those born outside these shores are eligible.:sly:
Hey John.
can you shed some light on this......PM would be fine if you dont want to post on the thread.
thx
My tax caluclation s/w turned up today - and I'm a happy boy. Best £30 I ever spent.
Without digging out the paper work I can't remember exactly how long I lived in the house - so the figures aren't exact. But the total works out to between £7K and £8K. I can live with that!
I'm off to see my parents this afternoon to discuss about inheritance tax and CGT, I think they've been doing some homework (they're not anywhere near old) so hopefully it'll be well planned for the later years :)
Saying that, by the time they pop off things will have changed dramatically and we'll all be screwed even more! :(
How exactly can an accountant help with health problems?
I thought this was a capital gains tax question not a health problem as i said only briefly looked at it last night.
Cheers
G
Hey John.
can you shed some light on this......
Make sure the taxman knows where your domicile is. You need to *tell* them, not allow them to decide for you. Once they've defaulted someone, it is hard to change this. The onus is on the taxpayer. Beforehand, the onus is on the tax authorites. Big difference.
If one were born outside the UK then it's dead easy to make to right moves (except if they were clueless and were entrapped/defaulted thanks to the taxman's careful wording;) )
If one were born in the UK, then it takes some skilled monouevres, otherwise any jackass would be laughing at the taxman's face:eyebrows: .
The number of british-born people trying to claim their main residence to be 'abroad' should make you start thinking that there might be something there.
Why do you think there is a tradition of hundreds of thousands of well-heeled foreign nationals buying expensive properties in London?
Because of the weather, proximity to Harrods, or something else?:sly:
When a £2m house opposite Hyde Park is sold, do you really believe they pay CGT? lol...
Setting up you taxation status is a step more high-tech than physically moving freaking house every year, isn't it?
interesting John - I shall get our accountant to look into this....will come back to you to pick your brains.....
Ta
mwilkinson
27-01-07, 15:08
Dave,
I think I can help out a little here, my wife is a qualified accountant and tax advisor.
She says in order to calculate the CGT she will require the following details (these may have already have been stated but it's easier if you give them in one go ;) )
1. What date was the house originally bought?
2. Exactly how much was paid?
3. Have you carried out any supplemental work to the property such as adding an extension or conservatory etc?
4. At what rate do you normally pay tax, i.e. are you a 40% taxpayer?
Cheers
I bought the property in September 1990. I paid £51,000 for it, it is now selling for £134,000. No supplementary work at all. I am a 40% tax payer.
I also lived at the propery for the first few years - will need to dig the paper work out to determine how long but it was roughly 3 years.
mwilkinson
28-01-07, 11:50
Dave,
The wife has kindly undertaken a computation based on the information provided which should be attached as an Excel file. (please not there are comments tabs on the table fo you to read)
You should probably get this checked out by a tax advisor who deals in CGT as my wife does not do this as a normal part of her job, but it won't be far out. She also says that if the property was ever let out a further allowance is available so let me know and I'll pass on the details.
Cheers, Mat and Reb.
Thanks a lot.
I replied by PM - it was let and I've just checked exact dates - it was let from 20/11/93 to 22/01/07.
I just re-ran the tax calculation s/w I bought. I hadn't realised that when I entered "Y" for the fact that it was let, it then added more boxes for the dates. I just filled them in and.....
The tax calculation s/w is now saying I own £834.40. How happy am I!!!!!!!
Thats much better than I thought it was going to be, not so bad after all :D
mwilkinson
28-01-07, 18:17
Happy to help mate
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