I have a property in Birmingham that I bought in August 2011 for £138,500. The property has been continuously rented out since April 2012. It is valued at £175,000 and my tenants wish to purchase it. How do I work out how much capital gains tax (CGT) I'm due to pay? What factors are involved in calculating the amount due?
Arthur Weller replies:
Very simply, your capital gain is £175,000 - £138,500 = £36,500. If you paid stamp duty land tax, estate agents fees, and solicitors fees when you purchased in 2011, and if you have to pay solicitors fees when you sell, you can deduct these from the £36,500. If you haven't used it so far in this tax year, you can also deduct the capital gains tax annual exemption (currently £12,300). The resulting capital gain is added on to your other income. Any part of the capital gain that falls below the higher rate threshold is taxed at 18%, and any part above the threshold is taxed at 28%.