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How do I calculate my capital gains tax?

Question I have a property which was bought in 2002 for £88,000. I bought another property in 2011, and let the first property. So in total out of the 13 years of ownership it was lived in as my primary residence for nine years. The property has been re-mortgaged. The current value of the property is £190,000 and the outstanding mortgage is £101,000. I'm unsure how to calculate roughly how much tax I will have to pay when I sell this house later this year.

Arthur Weller replies:

Assuming you sell the house in 2016 ('later this year') for £190,000, having owned it for 14 years, and making a capital gain of £190,000 - £88,000 = £102,000, your gain per year will be £7,286. The first nine years are exempt under the private residence relief rules, due to actual occupation. The last 18 months of ownership are exempt due to the final period exemption. So only the middle 3.5 years are taxable. The capital gain attributable to these years is 3.5 * £7,286 = £25,500. However, since you let the property during those years, the ‘letting exemption’ is available to you, and it reduces your taxable gain to nil. So no capital gains tax to pay.


Property Tax Insider This sample question and answer is taken from Property Tax Insider, a monthly UK tax saving magazine for landlords and property investors.

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