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Just getting round to sorting my 18-19 tax return. Thing is, I sold the property in June 19, so can I lump the income and expenditure from April to June 19 in with the previous year, or do I have to do the 2 years separately?
You’ll have to do 2 years unfortunately.
Meh, that sucks. I also assume the CGT allowance isn't a rolling thing? Ie if I had the flat for 5 years (never lived in it), I don't get 5 years worth of allowance, just whatever the allowance is in the year I sell?
LOL. Yes you have an annual CGT allowance, it doesn’t roll over.
Seems a bit odd? The value of the flat has gone up ~20k, over 5 years. Why does it get taxed in the final year as if I've only had it for a year. Doesn't seem to reward longer term investments? Folk who sell houses 20+ years after buying must get a proper slat hoofing?
Has it changed? As I've read an (admittedly quite old) article that mentioned you could claim back the allowance for each year you had the property.
Not talking astronomical sums here, but still.
Gains are always taxed in the year they are realised no matter what is being sold. You can carry over losses but those rules are complicated and you need to actually realise a loss as well. Remember this only applies to houses that aren’t your normal home, although personally I think this is wrong and house price gain should be liable for CGT as it’s still a gain.
If you make lots of money, you pay a lot of tax that’s the way our tax system works . It’s one of the downsides of property as an investment as it’s an all or nothing sale so you have realise all the profit at once.
Remember that the maximum CGT rate is only 28%. Significantly less that the peak income tax rate.
Yeah, I'm not begrudging paying it, I guess it's the all or nothing nature of it that I hadn't factored in.
edit, 18% for me, so not that much less than standard
yes, only an anual CGT allowance however don't forget you get indexation allowance and you can also include any capital improvements e.g. an extension
The annual tax free allowance is £12k which TBH is pretty good.
This which? page is really clear and informative for CGT queries, worth a read
https://www.which.co.uk/money/tax/capital-gains-tax/capital-gains-tax-on-property-avuq96u1500f
Indexation can't be used anymore 🙁
I don't suppose that the flat being the only property I owned, despite me not living in it, helps me? (I was renting the house I lived in)
12k is good, per year, but not so great if you are talking about lots of years worth, all at once.
Did you ever live in it, lettings relief is still valid but I think is being abolished this year. It was 40k.
Don't forget your buying nd selling costs, plus capital spend. To offset the gain.
I spent one night in it on day of exchange, that's it. Yeah included buying and selling costs, no capital spend. Only fixing what was broken.
I don’t suppose that the flat being the only property I owned, despite me not living in it, helps me? (I was renting the house I lived in)
Nope. You can maybe move in to have it as your primary residence, and then can get 18 months relief (edit - looks like its only 9 months from 2020). Read the link I posted, everything is very clear.
You invested money in an investment (a property) and now you now quite rightly have to pay tax on the capital gain.
Whether the discord between the treatment of B2L/second homes and primary residential property is fair is another query.
Personally I would be in favour of taxing all property gains inc primary residential (yes, I own property) but I appreciate this would be an absolute vote killer for any party suggesting it.
Indexation can’t be used anymore
WHAAAAT that is so rubbish!
Shows my tax knowledge is a little out of date!
Again, I have no gripe with paying tax on profits. What seems strange is that it is more tax efficient to have short term investments than long term ones. Eg, make 12k per year selling stuff for 5 years, no tax. Make 60k on selling something you’ve owned for 5 years, 11-17k tax.
Yeah except you have high transaction costs with property so it isn't efficient from a total value perspective to buy/sell frequently. You could have invested in a shares and then sold down your investment over multiple tax years to manage your gain.
There are plenty of things in our tax system that aren't fair, nor are they logical.
This is why really rich people pay £££ for tax advice as good tax planning can hugely impact your returns. Also, being really rich makes it easier to be more tax efficient!
Cgt is actually reducing the supply of available sales stock to first time buyers. Say a London landlord owned a few rentals for a few years so is sitting on big taxable cgt gains. He could sell and pay the cgt, or just let the rentals tick on, the tenants in situ cannot buy as the cgt is too much.
So if cgt were waived for a sale to the in situ tenant it would be a win win.
I must say that I don’t think handing a state subsidy to landlords is the best way to address housing issues.
Well rest easy. I did this years return last night, a little tired. Missed off one expenditure so have over paid to the tune of £200. Or rather would have, if the govt payment site wasn’t **** useless. (‘Your billing address doesn’t match what your bank has on record.’ I copied and pasted it from my latest bank statement....).
And I’ve now sold the flat, so one less blood sucking, evil private landlord in the system. Won’t be doing it again.