[cite]Posted By: Airman Brown[/cite]The marginal rate for 2009/10 tax year was 18 per cent and you don't pay it on the first £10,100 of profit in the tax year.
Actually the 18% rate applies to disposals up to and including 22nd June 2010 aswell, regardless of marginal income tax rate. After 22 June 2010 the new rules and rates apply. If you realise gains before and after this date in ths current tax year, I think (not 100% sure) you are allowed to allocate the £10,100 2010/11 allowance first to the post 22 June disposals to minimise the CGT liability.
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If the property is owned by more than one person (typically two) then another annual allowance of £10,100 is potentially available giving a potential £20,200 (assuming two people owning the property and no other capital gains absorbing some or all of the allowance).
Expenses on purchase and sale are also legitimately available to reduce the gain. These will typically include legal costs, survey fees and estate agent fees.
It is worth bearing in mind that the main or Principal Private residence is completely exempt from capital gains tax so it might be possible to demonstrate this depending on circumstances. That is what the "property flipping" scandal re MPs' expenses was all about essentially.
If you have council tax bills and other utilities bills in the name of one of the owners around the time of sale you may be able to build a case for that property being that person's Prinipal Private Residence. This will be easier for cohabiting unmarried couples than for married couples or those in a civil partnership.
In short it depends on your individual circumstances. I do not profess to be an expert on this but hopefully thje above is food for thought at least.
Thanks so far.
Basically, bought a place with girlfriend/now wife but due to depressed state of the market in dec 2008 we didnt sell her original house. Her elderly mum rents the house (at below market rate) via housing benefit/council. no profit is being made.
If we came to sell the house do we get lumbered with massive tax bill ?
Do we have to declare money coming in as rent seeing as no gain is actually being made?
[cite]Posted By: MrOneLung[/cite]Thanks so far.
Basically, bought a place with girlfriend/now wife but due to depressed state of the market in dec 2008 we didnt sell her original house. Her elderly mum rents the house (at below market rate) via housing benefit/council. no profit is being made.
If we came to sell the house do we get lumbered with massive tax bill ?
Do we have to declare money coming in as rent seeing as no gain is actually being made?
If she still has a mortgage on her original house then the mortgage interest can be offset against the rental income along with other expenses SHE pays in the way of maintenance etc. So whilst the rental income is taxable if the rent is below market rate as you state then it sounds as if her legitimate expenses should cover most of it.
In my opinion it would be wise to declare this rental income in any event but especially if public bodies (housing benefit) are involved as agencies increasingly talk to each other. The only function of the data protection act in reality, as far as I can see, is to prevent ordinary people helping relatives and friends with their problems. Everybody else has carte blanche it seems to me but I digress!
I wasn't aware the property was unsold so if and when you come to sell the property you may wish to consider moving in and establishing it as your Principal Private Residence prior to selling if you wish to avoid Capital gains Tax. Once sold move back to the other house which then becomes the Principal Private Residence.
Hope this helps. Once again I do not profess to be an expert on this.
You have 3 yrs from the date of moving out of the property before any gain is assessed. Therefore as long as you have some evidence to show that she lived in the property umtil Dec 2008 then the CGT clock deosn't start until Dec 2011 - therefore if you sell it before that date there is no gain at all - otherwise only gains from Dec 2011 count.
As previous posters have mentioned , she could move back in after Dec 2011 and the clock starts all over again. Therefore, should you have a "bust-up" over xmas 2011 and she moves out and back into her old property FOR MORE THAN 6 MONTHS then the 3 yr clock starts all over again.
One point to note. Should you decide to sell the property to her mum (or any other person) for less than the market price, any CGT will be assessed on the market price at the time and not at the price you sold it for. IE - cant sell it for peanuts, not make any money on it and therfore no gain.
[cite]Posted By: golfaddick[/cite]You have 3 yrs from the date of moving out of the property before any gain is assessed. Therefore as long as you have some evidence to show that she lived in the property umtil Dec 2008 then the CGT clock deosn't start until Dec 2011 - therefore if you sell it before that date there is no gain at all - otherwise only gains from Dec 2011 count.
As previous posters have mentioned , she could move back in after Dec 2011 and the clock starts all over again. Therefore, should you have a "bust-up" over xmas 2011 and she moves out and back into her old property FOR MORE THAN 6 MONTHS then the 3 yr clock starts all over again.
One point to note. Should you decide to sell the property to her mum (or any other person) for less than the market price, any CGT will be assessed on the market price at the time and not at the price you sold it for. IE - cant sell it for peanuts, not make any money on it and therfore no gain.
hope this helps
Golfie you sound pretty clued up on this.
I take your point re the "CGT clock" but is there not a danger that, because the place has been let, the PPR exemption will no longer apply and that, to get it back, they will need to "move in?" Or does it not matter what you do between December 2008 and December 2011?
another thought - I don't know how long your girlfriend had lived in the house, but if it was 10 years you could probably argue that most of the gain was pre dec 2008. I don't know whether the gain would be pro rata over the period or whether an estimated valuation would be made at dec 2008 (or dec 2011) depending on above.
Shouldn't matter - as long as there is no more than a 3 yr gap between you toccupying it. You could have rented it out and then moved back in for a number of years and then sell it , or move back in for 6 months...............makes not a jot.
just have to make sure its documented (council tax , utility bills, bank statements etc) showing at least a 6 mnonth period of occupancy.
Comments
any gain (less expenses) is to be added to your income - any part that goes over the 40% bracket you pay at 40% the remainder is at 20%
****simples****
PS - there is more to it than that but I charge for my time & advice...........and i'm not cheap !!
Actually the 18% rate applies to disposals up to and including 22nd June 2010 aswell, regardless of marginal income tax rate. After 22 June 2010 the new rules and rates apply. If you realise gains before and after this date in ths current tax year, I think (not 100% sure) you are allowed to allocate the £10,100 2010/11 allowance first to the post 22 June disposals to minimise the CGT liability.
ZZZZZZZZZZZZZZZZZZZZzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
Expenses on purchase and sale are also legitimately available to reduce the gain. These will typically include legal costs, survey fees and estate agent fees.
It is worth bearing in mind that the main or Principal Private residence is completely exempt from capital gains tax so it might be possible to demonstrate this depending on circumstances. That is what the "property flipping" scandal re MPs' expenses was all about essentially.
If you have council tax bills and other utilities bills in the name of one of the owners around the time of sale you may be able to build a case for that property being that person's Prinipal Private Residence. This will be easier for cohabiting unmarried couples than for married couples or those in a civil partnership.
In short it depends on your individual circumstances. I do not profess to be an expert on this but hopefully thje above is food for thought at least.
Basically, bought a place with girlfriend/now wife but due to depressed state of the market in dec 2008 we didnt sell her original house. Her elderly mum rents the house (at below market rate) via housing benefit/council. no profit is being made.
If we came to sell the house do we get lumbered with massive tax bill ?
Do we have to declare money coming in as rent seeing as no gain is actually being made?
If she still has a mortgage on her original house then the mortgage interest can be offset against the rental income along with other expenses SHE pays in the way of maintenance etc. So whilst the rental income is taxable if the rent is below market rate as you state then it sounds as if her legitimate expenses should cover most of it.
In my opinion it would be wise to declare this rental income in any event but especially if public bodies (housing benefit) are involved as agencies increasingly talk to each other. The only function of the data protection act in reality, as far as I can see, is to prevent ordinary people helping relatives and friends with their problems. Everybody else has carte blanche it seems to me but I digress!
I wasn't aware the property was unsold so if and when you come to sell the property you may wish to consider moving in and establishing it as your Principal Private Residence prior to selling if you wish to avoid Capital gains Tax. Once sold move back to the other house which then becomes the Principal Private Residence.
Hope this helps. Once again I do not profess to be an expert on this.
As previous posters have mentioned , she could move back in after Dec 2011 and the clock starts all over again. Therefore, should you have a "bust-up" over xmas 2011 and she moves out and back into her old property FOR MORE THAN 6 MONTHS then the 3 yr clock starts all over again.
One point to note. Should you decide to sell the property to her mum (or any other person) for less than the market price, any CGT will be assessed on the market price at the time and not at the price you sold it for. IE - cant sell it for peanuts, not make any money on it and therfore no gain.
hope this helps
Golfie you sound pretty clued up on this.
I take your point re the "CGT clock" but is there not a danger that, because the place has been let, the PPR exemption will no longer apply and that, to get it back, they will need to "move in?" Or does it not matter what you do between December 2008 and December 2011?
just have to make sure its documented (council tax , utility bills, bank statements etc) showing at least a 6 mnonth period of occupancy.