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capital gains on PPR

capital gains on PPR

Didn't find your answer?

If you sell your house  and it ceased to be your PPR 3 years ago, I believe there is now 18 months of tax to pay....

But do you pay tax on the whole value ie sale price £150,000 less purchase price £10,000 so £140,000 gain?

or do you take the value at the time it ceased to be your PPR?

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Euan's picture
By Euan MacLennan
21st Sep 2014 13:09

Basic CGT rules

If the house has been your (main) private residence at any time during your period of ownership, you will be entitled to PPR relief and if applicable, to lettings relief.

You start with the gain over your period of ownership (or since March 1982 if you bought it before then).  You then apportion the total gain over:

the period in which you were living in the house as your home, plus the last 18 months if you have sold it after 5 April 2014, andthe period during which it was let, if applicable.

You get PPR relief for the gain apportioned to (1) and if applicable, lettings relief up to the least of:

the PPR relief in (1),the gain during the period of letting in (2), and£40,000.

You deduct the reliefs from the total gain and after adding any other capital gains in the tax year in which you sell the house (or deducting any capital losses brought forward or in the year), you deduct the annual exemption (£11,000 in 2014/15) to arrive at your net chargeable gain.

The rate of tax depends on your other income in the year.  To the extent that the net chargeable gain falls into your basic rate tax band, you pay tax at 18% of the net chargeable gain or at 28% on the gain falling into the higher rate tax band.

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By MET128
21st Sep 2014 14:56

so

 

 

Sale Value £160,000

Price at 1982 £30,000

Gain = £130,000

 

Total time April 1982 - March 2014 = 30 years = 360 months.

April 2014 to October 2014 = 7 months

Total 367 months.

 

 

£130,000/367 months = £354pm

 

Last 3 years property was rented and therefore not PPR. Get 18 months after moved out counting as PPR? so 18 rental

 

18 months * £354 = £6376 Capital Gain.

 

As this does not reach the tax allowance (2*£11000 for a married couple) then no tax to pay.

 

 

Have I got that right?!

 

 

 

 

 

 

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By johngroganjga
21st Sep 2014 15:11

Your calculation is unorthodox, but you seem to get the right answer but for the impact of the new fact that you now disclose, namely that the property was let for 3 years. Lettings relief will cover the whole of the gain that PPR doesn't. So the gain before the annual allowance is £Nil.

Also you now disclose that the house is owned jointly. Your calculation assumes that they moved in and out of the house together. Is that right?

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Replying to 2003bluecat:
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By MET128
21st Sep 2014 15:21

How would you calculate it?

johngroganjga wrote:
Your calculation is unorthodox, but you seem to get the right answer

 

How would you do it?

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By MET128
21st Sep 2014 15:16

yes

 

moved out together and into a new house 3 years ago. Then rented out the old house....

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By MET128
21st Sep 2014 15:20

if there is no tax to pay

 

do you still need to declare it in any way to the inland revenue?

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By johngroganjga
21st Sep 2014 16:41

The orthodox way is to calculate the total gain then deduct the reliefs. You calculate the the taxable gain after the reliefs from scratch.

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By MET128
21st Sep 2014 19:33

surely

 

 

the reliefs are taken off after you have worked out the taxable amount? 

 

 

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By johngroganjga
21st Sep 2014 20:28

No of course that's not right. Because if the reliefs were not deducted before the taxable amount was arrived at deducting them would be a waste of time.

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By MET128
21st Sep 2014 20:39

do you mean like this?

 

 

it would give a different answer...

 

 

Sale Value £160,000

Price at 1982 £30,000

Gain = £130,000

Less allowances 2*£11000 = £108,000 Gain

 

Total time April 1982 - March 2014 = 30 years = 360 months.

April 2014 to October 2014 = 7 months

Total 367 months.

 

£108,000/367 months = £294pm

 

Last 3 years property was rented and therefore not PPR. Get 18 months after moved out counting as PPR? so 18 rental

 

18 months * £294 = £5297 Capital Gain.

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By King_Maker
21st Sep 2014 20:50

Have you read HMRC's Help Sheet HS283 on the subject?  https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

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By johngroganjga
21st Sep 2014 23:01

You knock off the annual allowance too early.

You are right down to the gross gain before reliefs of £130,000.

Then calculate the PPR relief and deduct it.

The calculate the lettings relief and deduct it.

In this case that takes you down to £Nil. But if you still had a positive figure it would be the gain before the annual exemption.

If you still had a positive figure it would be the taxable capital gain.

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By MET128
21st Sep 2014 23:43

I see

 

 

I see johngroganjga,

 

You mean £130,000 Gain.

Less relief which = £130,000 * (349/367months) = £123,624

£130,000-123,624 = £6376 gain.

 

Yes I suppose i did do it a bit back to front in that case!

 

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By johngroganjga
22nd Sep 2014 04:56

That's the right way round but you've forgotten the lettings relief.

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By MET128
22nd Sep 2014 11:00

lettings relief
Do they not have to return to the property as their PPR to get lettings relief?

They get 18 months counted asas PPR after they moved out, after that is it not just counted as a rental property andd no longer their PPR?

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By johngroganjga
22nd Sep 2014 11:10

No.  Lettings relief is given

No.  Lettings relief is given when at any time the property has been a PPR.

In your explanation all but 18 months of the entire period of ownership was covered by PPR.  You said that the property was let during that 18 months.  So lettings relief is available for that period.

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Replying to VP:
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By Saxby & Sinden
30th Sep 2014 17:43

Your time

Hi John

Well done, excellent advice & patiently done ... but where do you find the time to deal with all these queries?

Keep up the good work.

Alan

 

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Euan's picture
By Euan MacLennan
22nd Sep 2014 11:26

@John

Thank you for persevering with this.  I thought I had set it all out clearly in my initial response yesterday, so I went out to walk the dogs via the pub, but evidently it was not clear to the OP.

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Portia profile image
By Portia Nina Levin
22nd Sep 2014 11:38

I must update my dictionary

Perseverance: Indulging foolishness.

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By TaxationPete
25th Sep 2014 10:09

You do not provide actual dates just number of months. If I use what you have provided it looks like this :

 

Purchase30,000 31/03/1982Disposal160,000 14/10/2014Total Gain130,000  PRR124,000372390Capital Gain6,000  Lett Relief5,995   Qual Days548Net Gain5  CG Allow22,000  CGT CGT     CGT Bill  

PPR can be worked out in whole months but LR is worked in Whole days.

You can also deduct costs of acquistion and sales and legal fees form the gross gain but you do not have a CGT liability anyway.

Regards Peter

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By mydoghasfleas
29th Sep 2014 12:37

Just out of interest

MET28 I take it this is your property.  The reason I ask is that if you are doing it for a client you seem way out of your depth. 

Also, you mention the ownership was between a married couple, was that always the case or were there changes of ownership during the letting period?  Recent experience with a client who thought he had been clever quickly unwound for him when we pointed out that he did not qualify for the lettings relief as it had never been let during his period of ownership.

 

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