tax question

Property Capital Gains

VAT Question

I am considering selling a property that was previously my main residence and is now let, what capital gains tax would be due and is there an optimum time to sell.

Original base cost was £50,000 in October 2002, value now £320,000 and it was used by me and my family as a home from purchase until October 2013.


VAT Answer

Pre budget changes – Currently the property attracts principal private residence relief (PPR) and lettings relief. The PPR is the period of occupation plus the final 18 months regardless of usage, thus assuming a sale in October 2019 there is a gain of £270,000 (320.000 – 50,000) accrued over the entire period of ownership of 17 years/204 months. The PPR is from October 2202 to October 2013 plus 18 months, ie 150 giving relief of 150/204 x 270,000 = 198529 leaving a net gain of £71471.

Lettings relief is then available which is the lower of an amount equal to the PPR relief, the net gain remaining or £40,000 so in this case £40,000 thus the chargeable amount is  £71471 – £40,000 = £31471 before any annual exemption is applied.

Post budget changes – Assuming the disposal takes place after 5th April 2020 say in May 2020 then the position is completely different. The gross gain remains at £270,000 and the PPR relief moves to 141/211 a £270,000 = 180,426 leaving a net gain of £89574. As the family did not share the property with the tenants lettings relief is no longer available so the chargeable amount before annual exemption remains at £89574.

The difference in the capital gain arising is significant at £58103 and as this is charged at 18/28%the saving for a sale before 6/4/2020 is a maximum of £16268.84.

Vantage Fee Protect Customer Testimonials

Having changed over to Vantage a couple of years ago we have been very satisfied with the service. Especially the claims handling and technical advice lines for both our firm and insured clients on employment and business legal matters. The webshop Vantage offer allows our clients to join and pay electronically. This positively impacts our bottom line and makes things simple and efficient for our clients.
Linda Giles Chartered Accountant

Can’t find what you’re looking for?

Contact a member of our team today.

Who we partner with