how much capital gain to claim and do i have to pay it all on 31st of January?

[lilasimpson]

Hi, we sold a buy to let house last year for 125,000 pounds and used all this money to buy anotherbuy to let property in june this year this time much more expensive so we had to borrow quite a lot. We have therefore no much money left and with christmas and all festivities coming up, we are very tight. As I have never been in this situation before, could anyone please advise me if i have to pay a lot of tax (capital gain) and would i have to pay everything by the 31st of january??? I am now worried, time went so fast it;s time for tax return again and we are soo broke!!!

How much did you buy the house you sold for 125K for? The difference between what you bought that for and what you sold it for is the capital gain, what you did with the money after that isn't relevant.

Was the house you sold jointly owned by you and your DH? (If yes this means you have two tax-free allowances to set against the gain).

Assuming you sold the house in the 2012-13 tax year, i.e. before April of this year, the tax is due in January. That's if you registered to do an online tax return. If you didn't, then I think you're already late.

Thanks tribpot, i did it online last year so i don't need to register again right? Bought it at 100K

what is the percentage tax i need to pay please?

Okay so the gain was 25K. Assuming there are no other costs that can be deducted (and really you need to speak to an accountant about this), your capital gain allowance in 2012-13 was £10,600 (figure about halfway down this page. If you owned the property with someone else, nearly the whole gain would be covered by the allowances, but if you were the sole owner you have a gain of 14,400.

How much tax you would pay depends on whether you're a higher or lower rate tax payer, and if lower how much of your lower rate allowance you have left. So the worst case scenario is that you owe £4,032, which is 28% of the gain.

Just to stress, this is only a layman's understanding of CGT, although I checked my working with HMRC when we sold a property this year. You need to work the numbers and really look to see if there are any deductions to be made. If you can get a free half-hour with a tax accountant this should tell you whether it's worth paying them to calculate all the deductions you can make to reduce this bill.

From what I've heard, the sooner you 'fess up to HMRC about not being able to pay the full amount, the better things will go for you. But I would take further advice here and elsewhere before you decide what to do.

No need to register for an online return again this year, as far as I can remember.

Thank u so much for your reply!! I will talk to an accountant, definately need help!!!

Have you considered using roll over? I'm not certain if it is available, but if so, the gain can be deferred until the second property is sold, as long as the second purchase is within a year before the sale or 3 years after.

Fiona, does rollover relief apply to buy-to-let properties? The HMRC website seems deliberately to omit it from the list of example 'properties used for business purposes' (whilst including furnished holiday lets).

a second vote for what tribpot has said
once you take into account selling fees and if it was owned 50 - 50 between you (which will be linked to who paid tax on the rental income)
the tax bill could be really rather small

AND
so long as you pay part of it by 31 Jan and keep drip feeding money to HMRC, the interest will (slowly) clock up but they will not hassle you too hard

Thanks all for ur reply. Unfortunately my husband had this house before we got married. And he will have to pay 40% tax. .

If the house is jointly owned, you have two exemption amounts, as you will each declare half the gain on your tax return. That means virtually all of the gain will be tax-free (which is a lucky break but please don't be quite so casual about your tax liability when you come to sell the new property!)

If the property is only in your husband's name then he will have to pay 28%, which was my 'worst case scenario' figure above.

Also, did your husband live in the house before you got married? There is a thing called taper relief which means you aren't whacked for the whole of the capital gain if you've lived in the property relatively recently.

Basically, you need to talk this all through with an accountant.