How much is Capital Gains Tax in UK for second property?

Nom&Nat · 17-01-2007, 10:38 PM

Hello folks

Please can you help us as we are possibly planning on selling our rental property to fund a new home in Oz and as its not our main domicile I think we may be hammered by the dreaded tax man? Does anyone know the exact figure on this? Or would it be better to hang on to the place and keep renting out for a few years.......? I hate decisions.......arrgghhhhhh Sometimes I think we should just sell the lot and go for it......

Many thanks

Nom n Nat

nev_n_angie · 17-01-2007, 10:43 PM

Hi

Do you have another property that you live in? Are you selling this too??

Capital Gains is based on the amount you sell minus the amount you paid for it. It is also based on individual tax allowances in UK. If you're working, then you will pay 40% tax on this difference if it was not your primary residence in the last 3 years. You will only pay 40% tax if you are already earning above the threasholds in you own PAYE.

I hope this makes sense??

Angie

Nom&Nat · 17-01-2007, 11:05 PM

Thanks for the quick reply guys!

Yes I live in another property. A small flat. I just hate the idea of giving back a big chunk of my profits for the last few years investment! Could I avoid this by living in it for a few years? If yes - do you know how long?
I see you have a relation in Brisbane....does he enjoy it there and how long has he lived in Oz?
I bet you are looking forward to your move, eh?#

Thanks again

Nom n Nat

gail.crease · 18-01-2007, 11:40 AM

Hi Nom and Nat

You both will get a capital gains allowance of £8,800 each so offset £17,600 from your profit before you calculate the tax. The rates you'll pay depending on how much you earn is on this link from inland revenue: http://www.hmrc.gov.uk/rates/cgt.htm

If you end up having to pay a lot of tax then wait until the start of the next financial year (after 5 April) after you leave for Oz to sell it and rent over there for a while. This way you can offset your personal allowance against the profit and pay lower tax rates. Of course once you're resident in Australia you will be subject to capital gains tax on your worldwide income and will have to pay tax there. However I don't know of any way that they will find out if you don't. Their tax system is similar to ours and it's up to you to declare it on your self assessment.

At the moment inland revenue do not let you include capital gains on your online self assessments so request a paper form from them before you leave to complete when you're in Oz.

Hope this helps. My fee in the post :P

Good luck

Gail

immy21 · 23-01-2007, 07:49 PM

I have 3 rented flats that my accountant tells me if I hold onto for two years after entering oz I will then not pay ANY capital gains tax on their sale.
Speak to an accountant or buy a tax guide

mikandjoolz · 25-01-2007, 09:19 AM

Best advice - get a good accountant. It may cost a few hundred but they can save you thousands. CGT is a very complex issue as I found when I sold a second house recently. I thought I would be paying tens of thousands in CGT but ended up thanks to my accountants knowledge paying just a few thousand.

Alan Collett · 30-01-2007, 12:04 AM

If you are no longer resident or ordinarily resident in the UK you are not subject to capital gains tax on the disposal of an asset, so long as the disposal occurs in a UK tax year in which you are NEVER resident or o/r in the UK, and so long as you do not return to the UK within 5 complete tax years of your departure.

HM Revenue booklet IR20 confirms this (search at http://www.hmrc.gov.uk).

If you are tax resident in Australia at the time of the disposal you then need to consider your liability to CGT in Australia ...

If you are interested there are also some free tax factsheets here:
http://www.collettandco.com/factsheet.cfm

Best regards.

BullCreek_Bob · 30-01-2007, 02:18 AM

Quote:

Originally Posted by immy21

I have 3 rented flats that my accountant tells me if I hold onto for two years after entering oz I will then not pay ANY capital gains tax on their sale.
Speak to an accountant or buy a tax guide

G'day

As Alan said, you can do it in such a way that you wont pay UK Capital Gains Tax, however if you are living in Aust on permanent residence or citizenship, then the capital gain is taxed here.

The tax will be determined by the sale price, less the purchase price, plus or minus any currency gains/losses as a result of changes in the exchange rates in that time then divided by two and tax assesses at your marginal rate (probably 45%) on that.

So as a general guide expect to pay tax of about a quarter of the gain from when you arrived in Aust to the time of sale.

Don't forget, that while you're here the rent from the UK properties is considered to be part of your taxable income here but you can also claim as a tax deduction any interest you pay on your mortgages in the UK.

Alan Collett · 30-01-2007, 03:01 AM

A quick note to clarify Bob's posting: Australian CGT on the disposal of assets owned at the time of becoming a tax resident of Australia is computed with reference to the market value of the asset on the date you become a tax resident. not the original cost of the asset.

This means that capital gains (and losses) arising before you commence Australian tax residency are disregarded by the Australian Tax Office.

All this is assuming the enquirer/s is/are not "temporary tax residents" of Australia, as that can remove the charge to CGT in Australia as well ...

Best regards.

BullCreek_Bob · 01-02-2007, 04:23 AM

G'day

Thanks Alan, I must have been half asleep at the time of posting because you're right my post was not the clearest . However I did say

Quote:

Originally Posted by BullCreek_Bob

if you are living in Aust on permanent residence or citizenship, then the capital gain is taxed here.

and then

Quote:

Originally Posted by BullCreek_Bob

So as a general guide expect to pay tax of about a quarter of the gain from when you arrived in Aust to the time of sale.

Am I forgiven :)