Capital gains tax?

[GillwithG]

My husband sold a house he bought in 1996 for �25,000 in 2004 for �70,000.

Although he lived in the house at first, it has been a let property for about 6 years.

Can anyone tell me what allowances are made against capital gains for this.

Other factors are This was his only property until 2003. We were not married until 2005.

Any tips or info would be helpful, I have tried the government website, it is a maze!!

Thank you

[kags]

1. Costs of sale and acquisition, such as legal fees and stamp duty may be deducted from the gain.

2. An indexation allowance equivalent to the percentage rise in the Retail Price Index from the month of purchase to April 1998 multiplied by the cost of purchase may be deducted from the gain (around �1500 depending when in 1996 it was bought)

3. A precentage taper relief will be applied to the gain less the above. This depends on the complete years of ownership after April 1998, and will be 20% if sold pre 6 April 2004, 25% if after (it includes a bonus year for owning the asset at April 1998)

4. If the property was in your husband's sole name when it was sold then the gain will be all his.

5.  As your husband did in fact live in the house at one point he should qualify for the last 3 years of ownership to be deemed exempt from charge to tax - this is worked out as a proportion of the gain calculated above - eg, total ownership = 8 years, therefore 3/8 of the final gain will be exempt. There may also be further relief due if he did not live in the house because of work commitments - see this leaflet.

http://tinyurl.com/8nnwk

Using rough estimates of dates I get the gain down to around �20,000, subject to any further reduction for work-related absence. An annual allowance is given (�8200 for the current tax year), and after deducting that, any gain left is charged as if it were the top slice of income for the year to calculate the rate of tax applicable.

I would strongly advise getting some assistance from the Inland Revenue with calculating the gain, your local office should be able to help.

[GillwithG]

Thank you kags that was a really thorough answer, I will ring the  tommorow, but now feel so much clearer on the whole thing, thanks again.

Gill

[kags]

Just re-read the question - there will also be relief for the period your husband did in fact live there - again on a time apportionment basis of the final gain, if it was as much as 2 years then it could be that 5/8 of the calculated gain in total is exempt, bringing it down to around �12 or �13K. My brain hurts now!