Question:
We bought a property 2 years ago for £96,000 in both mine and my wife’s name. We owe £75,000 on a buy to let mortgage. The house is up for sale for £125,000. How much CGT will we pay (we are both working and are in the 20% tax bracket)?
Arthur Weller Replies:
The difference between the sale proceeds and the acquisition cost is £(125,000 – 96,000) = £29,000 Split between you and your wife makes a gain of £14,500 each. Assuming that neither of you are using your capital gains tax annual exemption of £10,600 in this tax year against any other capital gain, it will be available to offset against this gain, leaving a taxable gain of £3,900 each.
If all of this gain falls below the higher rate threshold of £35,000 then it will be taxable @ 18%, making a CGT bill of £702 each. If you had allowable expenses on purchase and sale, such as legal fees, estate agents fees and advertising fees, then these can be added into the calculation to reduce the figure of £29,000
