Tax Relief

[pinkerton]

My wife and I own three flats which we rent out. If we sell one of them, do we calculate capital gains tax on just the one we sell, or on gains made on all flats since we bought the first one? Also, are we each entitled to the capital gains annual tax relief (currently £11,000), or does that apply to the transaction itself?

[whistonian]

I think it only applies to the one you sell as you haven't made any capital gain until you actually sell.However I would follow Colins advice.

[Old_Geezer]

My guess would be just on the one asset you sell. You still have the other two awaiting their turn to trigger a CGT payment (if applicable). After all it's paid on gains you made and until you sell you haven't made the capital gain.

[Gizmonster]

You'd be better employing an accountant, but as far as I'm aware, the gain only needs to be calculated on the property that you sell and you're both allowed to use your CGT allowance, assuming that you both own the property in question.

[Old_Geezer]

Again I guess, and I'm less confident of this, but if each of you only gained half of the total gain, I would have expected both to apply each to the gain made by each; but knowing how life is, they have probably wangled it so only one does.

[Gizmonster]

Thinking about it, I was in a similar position about 8 years ago. I bought a house with a friend and after we'd renovated it, I wanted to sell; but my friend didn't. We got an estate agent to value the house and my friend bought me out for half of the estate agent's valuation. We'd made approx £20k profit (£10k each). I used all of my CGT allowance on my share of the profit - an accountant did all of my paperwork.
You've a personal CGT allowance each tax year, irrespective of whether you made it jointly or not.

[Gizmonster]

** You've a personal CGT allowance each tax year, on any gains made, irrespective of whether you made the gains jointly or not. **

[buildersmate]

Most of the responses above, whether a guess or not, have this correct.

The gain only applies to the asset (flat) in the tax year you sell it, joint owners divide the net gain made in half to calculate their personal gain, then deduct the annual allowance of £11k, to find the residual sum on which the tax is paid.
Any positive figure residing after deducting the eleven k is subject to the tax at a flat rate of 18% if you are a standard rate taxpayer or 28% if you are a higher rate taxpayer.
The only reason to employ an accountant might be to ensure you take account of all the costs that you have incurred in improving the property over the years of ownership plus all your selling expenses including estate agent and conveyancer.

For many people DIY should be possible.

[buildersmate]

So the whole premise of Answerbank is a waste of time then? - and the stock answer to every single question is: - 'Why don't you ring the xyz office. That way you speak to the experts'.

A fat lot of use that is.

[dzug2]

..The only way you can get an answer you can trust is to go to HMRC //

The trouble with that is they might not answer the question you thought you were asking but some other question - particularly if you don't express it that well

[Peter Pedant]

relatively simple

CGT on one flat - remeber the capital allowances - those are the ones the tax man disallowed on the grounds they werent income -

so long as you have executed the right documents then you can spread the CG between the two of you