Tax question please.

You don't state which tax year, but if it was this year.

Providing you have not used any of your CGT allowance you will be subject to tax on 1,900 so £342 to pay

Thanks madasahatter.

Apologies but it was actually 5th October 2006 when I sold the property after purchasing it the December before.

What calculations did you do to come to that figure?

You sold the asset in tax year 2006/7. The allowance for that year was £8,800. You have a liable gain of £3,200 which will either be taxed at 22% or 40% depending on weather you are a higher rate tax payer, or the gain would make you a higher rate tax payer. You would not be eligible for any taper reliefs as you hadn't held the asset long enough. You are allowed to deduct all expenses in buying, selling, insuring and maintaining the property while it was in your possession. If it was your principal place of residence then there would be no liability to CGT, unless property development was your business, in which case the whole profit would be classed as income - confused? Aren't we all!

CGT is now levied at a flat rate of 18% with, to all intents and purposes, no reliefs.

I do fall into the 40% tax bracket and it wasnt my primary place of residence. It was purely investment.

So does that mean I will have to pay 18% of the £3200 after costs?

Unfortunately not £3,200 at 40% so £1,280 to pay. The 18p rate does not apply for the relevent tax year.

OK. The cost of buying and selling the place along with maintenance should more or less wipe out the £1280 shouldnt it?

Costs come off the £3,200, then the tax is 40% of what is left.

You did buy it in your own name, or with your wife? If you bought it together, then you can split the CGT, so you would have no tax to pay.

I bought it myself. Wish I'd put her name on it too in hindsight :(

The 'correct' way to calculate your liability.

Bought for 100,000
Sold for 112,000

Profit 12,000

Less
Legal fees 1,500
Stamp duty nil
Estate agents fees 2,500
Maintainance 200
Insurance 200
Weekly travelling expenses to property to comply with insurance conditions 200

Total Expenses 4,600

Profit after expenses 12,000 - 4,600 = £7,400

Unused CGT allowance for tax year £8,800

In that senario there would be no tax to pay. As the gain falls below the allowance.

Would any rental income made on the property be added to the 12K or is that dealt with seperately?

Separately

OK that's put my mind at rest a bit. Thanks very much for your time and advice B-)

If you buy and sell too many properties you dont live in then the HMRC will take the view that it is in the nature of a trade and you will be liable to income tax rather than CGT on the gains. There is no hard and fast rule as to how many but I would suggest that more than 2 within a 5 year period could attract their attention.