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Capital Gains Tax


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I have been a landlord for nearly ten years, I have nine properties and I am going to sell one property next year and have just started thinking about CGT ( a bit late I know ). I would appreciate any advice.

I purchased the property ( buy to let ) three years ago for £115k and hope to sell for £145k leaving me 30k subject to CGT. The property was purchased in both mine and my wife's name. So I will get 2 x 8,800 allowance as I have no other gains. Can I also offset the costs of buying and selling the house e.g solicitors fees, stamp duty, mortgage costs etc and also what if any other costs, releif are allowed ( it has never been my residence ). Taper releif has been mentioned to me, but I havn't fully grasped this.

Also one final thing that confuses me is that CGT is taxed at your personal limit. Does this mean the profit of the house sale is added to your earnings to decide what tax bracket ie is it profit after all costs, capital gains releif etc is deducted ?

Sorry if there is anything I have missed and appreciate there is more than one query.

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Sherena .....Plym77 is our resident tax expert and will give you the definitive answer but I can give you a quick overview.

Your capital gain will be minimal in real terms when the sums add up and it is unlikely you will have any capital gains tax to actually pay.

You can deduct all expenses such as Solicitors and Estate Agents fee's. Major installations such as New Kitchens can also be deducted.

By using experts such as Sherena to handle Tax matters you can avoid a lot of hassle and any fee charged is well worth it because the Inland Revenue will be far more satisfied with a signed off account from a registered Chartered Accountant than from a member of the general public.

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Hi Mogsie

And thanks to Melboy for the input!

Melboy is right, on a gain of £30k, less 5% taper (assuming held between 3 - 4 years), tax will not be substantial - you are looking at a CGT bill between 2.2 and 4.5k. If you have other costs, this will reduce the tax further.

If one of you is higher rate and the other is basic rate there is a simple way to reduce the tax liability by calculating a larger proportion to be in the lower earners name (a transfer between spouses is done at no gain/no loss). I would suggest that a computation would need to be done by a tax advisor. Once calculated, this can be done by a Declaratin of Trust drawn up by a solicitor for a few hundred pounds. It is also possible to reduce the CGT liability in this case to £Nil by involving a Trust, but this has to be done over two tax years and so if this is something you want to consider it would need to be in place by 5 April 2007 for a sale after this date.

Melboy is right, whilst you can of course prepare the computations yourself, it is worth consulting a tax advisor to work this out for you properly as HMRC are more confident with computations submitted by tax advisers and accountants. Should you need help with this, I can offer a competative quote - please email me on sherena.glanton@horwath.co.uk

Best of luck with the sale!

I hope this helps!



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