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capital gains tax/inflation

Started by katyb, July 25, 2022, 12:17:33 PM

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Hi, would appreciate any help or advice with this. Basically I took a house in part exchange when unable to sell our family home approx 22 years ago. Paid £40,000 with no mortgage (house in my name as my husband was getting a first time mortgage on our new home where we still live). Have been renting it out ever since but now looking to sell, valued at £150,000. As it was my only source of income I have not had any tax liability and so not bothered keeping receipts for all the various jobs done over the years, double glazing, new kitchen, bathroom, central heating,etc. Aargh yes I know!

Applying basic commonsense I would have thought if I bought a property for  £40k, did it up then sold short time later for £150k I would expect to pay tax on the £110k profit. But I would have expected that there would be some inflation element built in to reflect 2000 prices yet it would appear not according to the Govt website.

My tenant is due to move out soon and there will be a time lapse before any repairs/decorating etc, property goes on the market, sale and eventual completion. Would it make any difference to my liability if I moved in, took over council tax and adopted the house as my "main residence"?

Simon Pambin

Yes, back in the day there was Indexation Allowance, whereby you calculated how much of the increase was down to inflation using the RPI, and got taxed on anything over that. You used to be able to get little books of indexation tables so that you could work it out manually. Then they decided that was "too complicated" and replaced it with taper relief, which crudely reduced the rate of tax you paid based on how long you'd held the asset ... and then scrapped that and replaced it with the current monstrosity. I reckon if inflation carries on the way it's going at the moment there'll be some pressure to go back to indexation allowance, which isn't really complicated at all, especially if people have got access to one of they new-fangled computers.

Anyway, I digress. The current CGT system doesn't really have much to offer the landlord these days: letting relief is a thing of the past, for example. You could try the PPR manoeuvre but you'd both genuinely have to move and not just keep a symbolic toothbrush there. What you can do, though, is gift part of the house to your husband (there's no CGT on gifts to spouses) and then he can use his CGT allowance (about £12k) on his share of the gain and you can use your allowance on your bit. It's worth paying for a bit of advice from your friendly local accountant: it's bread and butter stuff to them and it'll probably save you money and angst over doing it yourself.


Thank you, your help is most appreciated. Yes I think an accountant is needed before we make any plans. Thanks again