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  • Tax

    Lettings relief

    My wife and I disposed of 2 properties during the tax year, one of which had been our main residence for the first 9.5 out of 14 years, let for 4 years, and then main res for the last six months that we owned it and the other which had been our main residence for the last 4 out of 8 years that we owned it, worked on for first 2years and let for 2years.

    1 Sale 875k, purchased £400k approx £100k spent on improvements and extension work and 20k fees = gross gain £355k.  I think ppr will remove (9.5+1.5/14) = 279 leaving gain of 76k or 38k each.

    (The 1.5 being the last 18 months of ownership, even though we weren't living there.)

    2 Sale 995k, purchased 490k approx 300k spent on refurb and extensions and fees.  Gross gain 205k.  I think ppr will remove 4+1 ie 5/8 leaving gain of appox £77k or 38.5k each.

    The 1 being the first 12 months when the house was being extended and renovated

     Question

    I understand that lettings relief can also be applied after ppr but I am struggling with the detail.  Is it per house or per tax year or per person etc? ie How much could we claim, given that these were our only gains in the tax year and without it lettings relief we would each be taxed on total gains of £76.5k for the tax year?

    Thank you to anyone who can tell me exactly how to apply it.

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    https://www.taxinsider.co.uk/1383-Lettin...Traps.html


    I think it looks like it is per property and in your case you look to have reached the £40k cap so on property one with your calculated £76k gain you would get £40k relief thus = £36k gain taxable or £18k each. One the second property with your calculated gain of £77k minus the £40k = £37k or £18.5k each

    So if my understand is correct you each have £36.5k gains minus your personal allownaces of £11.1k = £25.4k charged at your marginal rate of probably 28% = about £7k each in capital gains very reasonable seeing as the gross gain is £560k an effective tax rate of about 2.5%

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    Thank you.

    Not terrible, considering I have been an idiot and just assumed that CGT would be based upon completion date and not exchange date.  I exchanged on the second of the sales yesterday for a completion next week.  It's annoying because I mentioned to both the solicitor and the Estate agent that I didn't want to complete before 5 April  as I had already used my 2016/17 allowances and neither of them picked up on the fact that echange date was important, I just happended to be chatting to the guy servicing the heater on our pool this morning and he told me the bad news! I could obviously have waited 2 days.  Never mind, maybe I will offload another BTL in 2017/18 and use our 17/18 allowances towards that as I am trying to unwind a lot of my portfolio while I still can.

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