Self assessment - sold property

[SFHJ]

Hi, just wanting to get my self assessment done, it’s been fairly straightforward the previous 3 years I have done it. However my husband and I had a house we rented out. We only rented it out due to a house move and we wanted to make sure we were happy with the move before we sold it. (One of those moves which would be difficult to reverse due cost of area we were moving to)

Tax year 19-20 we did not receive any rent for the property as the tenants moved out the March. We had the costs of insurance/ continued to pay the mortgage but did not receive an income. The house was empty from end of March until it was sold in the September.

We sold the property in the September for 33,000 more than what we paid for it. Do we need to include the 33,000 for capital gains? My husband and I both own the property jointly and when we have done the tax return the rental income was always split in half so Technically we gained 16,500 each. I’ve read something that under 48,000 doesn’t qualify for CGT?

Any advice on how to do the self assessment? Do we need to take in each individual share? Any advice would be great.

The gain is 16,500 each. You each put your gain on your own tax returns (assuming you hold it 50% each - not everyone does).

You are probably now completing a tax return for the tax year ending 5 April 2020. You had no rental income as tenants moved out and just an empty presumably second property in addition to your marital home?

There was a new law this year were you have to tell HMRC about property sales other than your home within 30 days of the sale not wait until the tax return so that might be worth looking into.

however I tihnk you have always had one marital home and if the increase in value was from a period the tenants were not in it or only part was there is some kind of HMRC apportionment of the gain. I would take advice from an accountant if I were you as it could save you 28% (probably your rate of tax on the gain but it may be lower) of the gain after deduction of capital costs (not income costs) and after deduction of annual CGT allowance that you both will have.

It's your own share of gains that goes on but now it has to be declared seperately in 30 days.

You can work out gain here - just halve everything if you own half
www.gov.uk/tax-sell-property/work-out-your-gain

You can take off things like estate agents and solicitors fees and you also get an annual capital gains tax free allowance of £12,300 each. Last 9 months you take off from the calculation and any period you lived there.

I doubt there will be anything to pay but if there is its added to your earnings for the year and charged at your marginal rate - so nothing in tax free allowance, then 18% lower rate income tax band then 28% higher rate. If you do find you are liable its worth considering increasing pension payments to lower income tax band. I'ld be surprised if you owe anything though.

We did inform HMRC as we were able to claim back the additional stamp duty we paid for our current house. I will give my work accountants a call to see if they can give some advice.
We are 50:50 so it will be 16500 each to declare along with no rental income.
Something for me to sort on Monday.

Okay so it sounds like you have a current house you live in so this is probably a second home so subject to CGT
Of your 16,500 gain 12,000 is the annual allowance which assuming you ahve not used for 2019/20 means 4500 left but you can deduct your half of the acquisition costs such as legal fees when you bought it and any capital spending (but not income spending on it) on it and also the sale costs - estate agents, solicitor. I would be surprised if you have any CGT to pay.

We did live in the house we sold, that was the family home and we rented it out for just shy of 3 years. A year after we started renting it we bought our current house which was classed as a second home so we had the higher rate of stamp duty. When we sold the house we rented we did get the difference in stamp duty back as it had been a family home.

We sold the house September 2019 so we are good for doing it on this self assessment. I’m getting together the costs for the sale solicitor etc so I have all the information there

You get private residence relief on the period you owned it - basically take gain so £16,500 then work out total months owned it and divide the £16,500 less cost of buying selling and improvement work (half) then your gain is just for the number of months you didn't live in it less 9 months and times it by that number. If that's under £12,300 no capital gains to pay if no other capital gains this year. Should be well under I would have thought.

So £16,500 say less £2,500 half costs selling, buying and improvements leaves £14,000 each.

Owned it 10 years is 120 months. Lived it in 7 years, not lived in for 3 years. So divide 14,000/120 months and times by 27 months. The rules ar slightly different for rented out but will be well under.

N = let period in days
P = total period of ownership in days
R = period of occupation by you in days plus add 551 days (last 18 months)

1. Take difference between net proceeds of sale after selling costs and cost of purchase inclusive of legal fees and stamp duty = G

1. Multiply G by R/P = X. This is your main residence exemption.

1. Take G less X = C. This is your chargeable gain.

1. Then deduct Lettings Relief which is the lower of:

— £40,000

— X

— N/P x G

1. C less the lowest figure found above is your gain after reliefs. Divide it in half, then deduct the £12,000 annual exemption unless it has been used on other assets to give you your final taxable gain.

1. Add that gain to your other income and if it notionally falls into the basic rate band the tax on that part is 18% otherwise 28%.

A tax adviser will be able to do a computation for you and prepare your returns under the ‘banner’ of their practice which might assist HMRC.

silkie they can also make £12k a year gains each without any CGT - the annual tax free allowance which they have probably not used .

I've included that in calculation though used this years £12,300 - all the info is online, with a calculator.