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?
Replies (21)
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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.
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?
The orthodox way is to calculate the total gain then deduct the reliefs. You calculate the the taxable gain after the reliefs from scratch.
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.
Have you read HMRC's Help Sheet HS283 on the subject? https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...
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.
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.
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
@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.
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
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.