Wife has just sold her old flat and made a modest gain on it. How does Capital Gains tax work – is there a process for it, or do you just ask for a self assessment form for that year?

self assessment.

There’s all sorts of rules on property that you’ve lived in, let and then sold.

It’s done via a tax return but I’d look at the formula for calculating the gain very carefully.

I ‘made’ about 25% on a flat in similar circumstances but ended up with no liability for CG.

My crude understanding is that you’re taxed on the gain from the value of the property on the day you let it (which is easy as she re mortgaged it before letting it, so we have a value).

I ‘made’ about 25% on a flat in similar circumstances but ended up with no liability for CG.

Did you still declare it, or just not bother?

My crude understanding is that you’re taxed on the gain from the value of the property on the day you let it (which is easy as she re mortgaged it before letting it, so we have a value).

That isn’t the correct way of calculating the gain. The value used are from when it was purchased to when it was sold less any costs i.e. legal and marketing.
There are reliefs available as well as hers and possible your (depending on what steps you took before selling) capital gains annual allowance. The cost an accountant would charge you for this service is minimal compared to doing it yourself and getting it wrong.

I’m sort of going through a similar process, but it’s more complicated as the house we’re looking to sell WAS our residence, and is currently the only house we own..
There’s all sorts of ‘things’ like ‘3 years grace’, thresholds etc etc
Thus, my accountant can deal with all this!

DrP

Drp I am pretty sure its now 18 months

In his Autumn 2013 statement the Chancellor announced that from 6 April 2014 (tax year 2014 to 2015) this final period relief will only apply to the final 18 months of ownership. There will be an exception for people who are disabled or in long-term care. This measure is set to become law later in 2014.

How it used to be was that you needed to calculate the average rise in value per month (sale price less purchase price divided by number of months). You then added up the number of months that you lived in the property and added 36 (looks as though this is now 18!) and multiplied that number by the value increase per month (with me so far?). You then add this to the Captial Gain Allowance (approx £10,000, assuming you haven’t already used it for anything else like the sale of shares etc) as well as all the costs associated with buying and selling the flat. This number is then subtracted from the TOTAL gain (Sale price less purchase price). If the number is negative then there won’t be any tax to pay, if the number is postive then this is the taxable amount you multiply by the applicalbe CGT rate which is 18 & 28% depending on how much you have made.

It’s actually not that complicated and the HMRC website has some good guides and examples.

EDIT : see above – depends on how long you’ve lived in it

You don’t pay CG tax on your residence, only additional properties.

I’m almost certain………..we never have.

Did you still declare it, or just not bother?

I declared it as income as I think I was able to offset some expenses from the sale against it 🙂

Theres also lettings relief of 40k but I dont know how you qualify for it.
Best pay for proper advice.

I’m still looking to tick the box for ‘I pay enough tax thanks’…

😉

DrP

I’m pretty sure lettings relief only applies if you’ve let all or part of your main residence.

If the ‘modest gain’ is less than £10k plus costs to sell then you won’t have to pay any CTG anyway.

If the ‘modest gain’ is less than £10k plus costs to sell then you won’t have to pay any CTG anyway

That’s likely but does depend on a lot of other things. CGT allowance is a total for the year not per transaction.

As for the ‘I pay enough tax’ box, any clue as to what level you’d set it at or is it down to the individual. 😉

Is the rule still there that you can ‘move’ back in for 6 months, negating any capital gains?

Is the rule still there that you can ‘move’ back in for 6 months, negating any capital gains?

Don’t think so. You’ll still be liable for the time you’ve let it, not 100% sure though.

CGT allowance is a total for the year not per transaction.

Yeh I know, I was assuming the full ctg allowance was still available.

Dont forget if u r married you get twice the 10k allowance.
just put the asset in joint names.
re 6 mth moving back in to negate cgt its the quality of
residence not quantity. Best get advice I am not an acct.

Do it yourself~~ hahaha
It’s good~~