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CGT on gifted property?


lewiss

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Hi,

I'm looking at selling a property that was gifted and am trying to determine if CGT needs paying on it.

Property was gifted in September 2016 to 2 people split 50/50 ownership.

Value in 2016 ~250k

Value now 2019 ~265k

So based on 7.5k profit (15k / 2), minus costs ~3k each and minus CGT allowance (12k per person) I work out that no CGT would be payable.

However the property has been let for most of that period (Feb 2017 - now). So I'm not sure how this works CGT wise.

Question: I'm getting a little confused if we would get letting relief and residence relief and if so how would it be applied?

Any enlightenment would be much appreciated

Thanks 

Lewis

Edited by lewiss
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2 hours ago, lewiss said:

So based on 7.5k profit (15k / 2), minus costs ~3k each and minus CGT allowance (12k per person) I work out that no CGT would be payable.

I agree with your calculation.

2 hours ago, lewiss said:

However the property has been let for most of that period (Feb 2017 - now). So I'm not sure how this works CGT wise.

Question: I'm getting a little confused if we would get letting relief and residence relief and if so how would it be applied?

Given that you have no CGT payable, why are you asking this question? Are you hoping to use your CGT allowances for other chargeable gains?

As I understand, private residence relief and lettings relief relate to the situation where either:

- you lived in the whole property for some time and then let out the whole property for some time; or,

- you lived in a portion of the property and let out the other portion of the property.

Over simplifying, you essentially get private residence relief for the time / portion that you lived in the house and lettings relief for the time / portion that you let the property out. https://www.gov.uk/tax-sell-home/let-out-part-of-home 

Did you live in the property / a portion of the property at any point in time?

p.s. i am not a tax expert.

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Thanks for the reply.

I wanted to check that the initial calculation was correct and it wouldn't be different if it had been let ou

14 hours ago, farmer andrew said:

Are you hoping to use your CGT allowances for other chargeable gains?

I assume I would have 7.5k (12 - (7.5 - 3)) to use as CGT allowance for 2019/20 after this.

It was lived in for 5months initially then subsequently let out.

Essentially I just want to reassure myself I've made the correct assumptions and calculations.

Thanks again

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45 minutes ago, lewiss said:

Thanks for the reply.

I wanted to check that the initial calculation was correct and it wouldn't be different if it had been let ou

I assume I would have 7.5k (12 - (7.5 - 3)) to use as CGT allowance for 2019/20 after this.

It was lived in for 5months initially then subsequently let out.

Essentially I just want to reassure myself I've made the correct assumptions and calculations.

Thanks again

Because it was your (only?) residence at some point, I think you should be able to claim private residence relief on ~23/36 (=(18+5)/36) of the gain and lettings relief on the remaining 13/36. If there is any gain left over, this will be subject to CGT and will utilise your CGT allowance, but it will be a lot less than the 7.5k above.

I have just guessed at some of the numbers from the information provided.  You need to do a proper calculation.

I am not a tax expert. 

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You should first use the main residence relief and the Lettings relief to reduce your chargeable gain. Based on the information you have provided, you have owned the property for 20 months (sept 2016 - May 2019).  You lived in the property for 5 months and are also entitled to claim the final 18 months of ownership - so actually your whole period of ownership is covered by main residence relief.

Lettings relief does not need to be claimed on this transfer and your CGT exemption of £12,000 is still intact for the year.

 

Alison Ward
Accountant & Client Manager

www.propertyhub.net/service/tax/

03_tax.png.6f4d9a5b7961f51a3bd16a0ac9912efe.png

 

 

 

 

We can only give general information on a public forum, and nothing in this post should be interpreted as advice. To speak to us about becoming a client and receiving bespoke advice, call us on 020 3936 2170 or email tax@propertyhub.net

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3 minutes ago, alison@propertyhub.net said:

You should first use the main residence relief and the Lettings relief to reduce your chargeable gain. Based on the information you have provided, you have owned the property for 20 months (sept 2016 - May 2019).  You lived in the property for 5 months and are also entitled to claim the final 18 months of ownership - so actually your whole period of ownership is covered by main residence relief.

Lettings relief does not need to be claimed on this transfer and your CGT exemption of £12,000 is still intact for the year.

 

Hi Alison, is it 30 months rather than 20?

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Ah - of course you are right! I have missed out a year (2019 is whizzing past so fast I forgot it was here!)

Apologies: So ownership is Sept 2016 - Aug 2017 - 12 months

                                                 Sept 2017 - Aug 2018 - 12 months

                                                 Sept 2018 - May 2019 - 8 months (to nearest complete month)

                                                                                          so 32 months in total

Main residence relief (PPR) can be claimed in full for (18 +5) = 23/32 months:   Net gain (after expenses of £3K) = £7.5-3 = £4.5K    23/32 = £3,234 exempt under PPR

Lettings relief can be claimed 9/32 x £4.5K = £1,265
(9 months being the period not covered by PPR).

 

Gain is covered by a combination of PPR/Lettings relief. CGT allowance does not need to be used against this disposal.

Note though that post 6 April 2020, the rules are changing - final period of ownership is reducing from 18 months to 9 months and Lettings Relief will no longer be able to be claimed.

 

Thanks for the spot Farmer Andrew.

Alison Ward
Accountant & Client Manager

www.propertyhub.net/service/tax/

03_tax.png.6f4d9a5b7961f51a3bd16a0ac9912efe.png

 

 

 

 

We can only give general information on a public forum, and nothing in this post should be interpreted as advice. To speak to us about becoming a client and receiving bespoke advice, call us on 020 3936 2170 or email tax@propertyhub.net

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