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capital gains tax-help, advice

  • Pink Flamingo
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19 Apr 12 #324865 by Pink Flamingo
Topic started by Pink Flamingo
i had a flat in london before I met him - for 8 years. It is rented out now and I remortgaged the flat to buy marital home where we lived for 5 years. I left last july because of his adultery. He is pushing for divorce. I am debating about moving back to my flat but have a big mortgage on it and marital home has no mortgage - which of course he wants. I worked and financed everything over the last 20 years. If i sold my flat in a few years time would I still have to pay CGT??? or does anyone know of a good financial adviser that I could put the question too??
Thanks for any advice or help!

  • rugby333
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19 Apr 12 #324866 by rugby333
Reply from rugby333
it was your primary residence and then ceased being so - is this correct?

If so for CGT purposes, you would take the total number of years owned (ie 13) and the total number of years let out (5) and the CGT would be total gain * 5/13.

This is not entirely accurate as there are indexed gains of house price value per year (which will reduce the gain) and you will have some free years (I think), but the principle is correct.

If therefore it became your primary residence again, then the divisor would increase (your liability would drop) ie if you owned it another 5 years, your CGT liability would be on approximately 5/18ths of the gain.

As an example: suppose you bought the flat for 100k and it is now worth 200k. There will be an indexed value gain: lets say that over 13 years that indexed gain is 30%. So the starting point for the CGT calculation would be cost price of the property of 130k. Your tax liability therefore would be 200 (current value)-130 (indexed value price) = 70k * 5/13 * the rate of CGT. I am unsure as to whether this figure of 5 is slightly reduced as you may be entitled to 2 free years (I think).

The current CGT liability and cost of sale should be in your form E as the flat (and all its liabilities) form part of your assets.

Does this answer your question?

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19 Apr 12 #324875 by Pink Flamingo
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Thanks so much, I posted very quickly as I am trying to decide what to do. The facts are that I have had the flat for 26 years it was bought for 48k and now worth 500k and has been rented out for 13 years alltogether, on and off- I have just worked out. Someone told me that I would have to pay 100k CGT on it if it was sold now. The mortgage I have on it is now 265k as I remortgaged to buy the marital home for 200k. maybe i need more specialist advice????If the information is on the form E I will also look at that before I make any decisions what to do. i am new to all this so just working it out as I go along but thanks so much for your help and if you have any more advice on these facts please let me know..

  • rugby333
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19 Apr 12 #324889 by rugby333
Reply from rugby333
you paid 48k in 1986. at a conservative guess the indexed value will now be at least 100k.

the number of years it is considered your primary residence will depend on whether you lived abroad, whether you had another residence etc. but conservatively assume you get no further dispensation. therefore a maximum of 13/26ths of 400k (that being 500k - 100k) is subject to capital gains.

This means your worst case scenario will be approx 30% of 200k or 60k tax liability

However I would think the final figure will be well below 50k of tax once an accountant has done his/her job properly!

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19 Apr 12 #324901 by dukey
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With the numbers your talking about you should be talking to an accountant, it should cost no more than £200-£400 to get a firm answer, from what i know of it Rugby is along the right lines.

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19 Apr 12 #324904 by soulruler
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Also if the marital home were to be sold then there would be no capital gains and the capital out of the FMH could be used to reduce the debt on the flat.

Get both options into your offers and disclosures.

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19 Apr 12 #324927 by Pink Flamingo
Reply from Pink Flamingo
Thanks so much, that''s really helpful.

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