Capital Gains Tax - I'm confused

[CupcakeSparkle]

I have a second property that I'm considering selling to purchase another property in a different area (thinking ahead for when DC want to move out)

Long term my property needs repair work. The location is good as its walking distance to a city centre but the area is not great.

The property was a inherited property and was valued at £150,000 5 years ago and that's the figure I registered it at land registry.

According to rightmove property prices in that area are going for about £300,000. 

So far I have done maintence on the property but no big jobs.

The plan is either sell as is or do up but I need to take into account capital gains tax and stamp price and cost of new house vs how much work needs doing to the house to see what option I want to take. 

Can anyone work out roughly how much CGT I will pay? I am getting conflicting advice online as some websites say it's
lower tax Rate - 10%
Higher Rate - 20%

Others say
Lower rate - 18%
Higher rate - 28%

I assume I am a lower rate tax payer as I only earn a profit of roughly £9-10k per tax year with no other income.

But other websites say you pay a higher rate after a certain amount of money.

I am getting very confused. 
 

[dynevoran]

Have you ever rented it out? Have you ever lived there?

[CupcakeSparkle]

Its currently being rented. No never lived there

[dynevoran]

Assuming you never lived there or rented it out:

The gain would be £150,000. There would be no stamp duty to deduct as you inherited it not bought it. Assuming you pay solicitor fees of £500 on conveyancing on purchase and estimate £1,000 on solicitors fees on sale, plus say 1% estate agents fees I.e. £3,000. This gives total associated costs of £4,500. The gain would therefore be £145,500. Then your CGT annual exemption of £11,100 would mean the taxable gain is £134,400.

If you have profit (I presume you mean from self employment) of £10,000 this would be all covered by your personal allowance for income tax. So all your basic rate band of £32,000 is taxable at 18% ( as it's a residential property) =£5,760 ; and the remaining gain of £102,400 at 28% = £28,672. So total CGT of £34,432.

So taking sale price of £300,000 and deducting the solicitors fees and estate agents fees estimated for sale of £4,000 and tax of £34,432 you would be left with £261,568.

[dynevoran]

Okay if you never lived there then it is as above. It's only if you have a period of residence that the rental issue becomes relevant. Hope this helps.

[CupcakeSparkle]

Thanks, that's the same calculation I came up with but a few people have told me that was wrong and as I'm a lower taxpayer it was a basic rate of 18% and someone else told me it was 10%.

Could you tell me if its a accountant or a solicitor who deals with the CGT part of it?

[dynevoran]

It will be on your tax return at the end of the tax year in which you sell. So an accountant would complete your return for you if you don't want to do it yourself. Those figures are based on a sale in 2016/17.

The residential property rates of 18% and 28% apply to you as it's a residential property. The 18% is applied to all income taxable up to the limit of the basic rate band and 28% to the balance after your basic rate band is used up. In case you want to understand exactly what you fall into and why those rates are applicable.

[CupcakeSparkle]

Thank you so much for your explanation I understand it now.

I do my own tax return but would use a accountant for that as that's way above what I do.

Thank you

[Sunnyshores]

havent checked the exact rules lately - but if you could live in the house for a while you could vastly reduce your tax bill.