Capital Gains Tax and PPR - How do you calculate it? An Example Calculation

[@levyashin]

Hi Kimberley, super video, It's been really helpful as I have just completed on a house sale of a property that I lived in and had rented. I have a question, is PPR a percentage of NET GAIN (CG after cost deductions), or GAIN (CG before deductions)? I know it's mentioned but just want to make sure. Cheers.

[@kimberleyshapcottpropertytax]

It is the gain after deductions.

[@ŁukaszNorek]

Hello great video What to do in my sytuation I thinking of sell my own house in UK I bought it 10 years ago with my wife . First 4 years we were living there and now we are renting out ( last 6 years ) because now we live abroad , so we are non residence . How to proof improvements ? house was empty no gas instalation , no carpets , olw windows when we bought it have all old photos. What to do after sale ? will we have to pay cgt tax? House has no mortgage. Any 5 year rule aviable because we are not planning to come back to uk ?

[@kimberleyshapcottpropertytax]

This is quite a complex scenario due to the overseas nature and question of residency. I would suggest speaking to a tax professional to get specific advice to ensure you minimise any tax that may be payable on the disposal.

[@gm4551]

Hi Kimberley, I hope you can answer a question for me. I'm separated from my wife, not formally but we've lived apart for around 15 years. We are now about to put the house we jointly own up for sale. She has lived in the house for the full 32 years we have owned it. I moved out when I took a job in another area of the country and I have lived in rented work accommodation since I moved out, so around 17 years. I've only ever owned the one property that my wife has continued to live in. When we sell our house, will I need to pay capital gains tax on my share of the gain for the time I have lived away?

[@johnbevan6290]

An excellent video. We bought our house in March 2001 for £60,000 and hoping to Sell for £250,000 We are in the process of buying our new home, all was going well until the buyer of our home pulled out. We have decided to buy our new house for cash, which obviously means we will have two properties. As we have lived in our home for 23 years on the date our contracts is signed. My calculation on the PPR is that we have lived in the house continues for that time we would only pay Capital gains tax every month after the initial date plus nine months after purchase. Which if my calculations are correct would be £570 per month after the ninth month. Is this correct? Any help would be appreciated. Thank you

[@kimberleyshapcottpropertytax]

You are correct with your summation that you will only pay capital gains tax after the period you lived in it plus 9 months. After this there will be capital gains to pay on the sale based on the gain that is made. If it is in joint names there will also be your capital gains allowances which will give you an additional £3000 each before any capital gains tax is paid. As you have the property going through legals, I would suggest doing another check on the calculation to see how it fits together. Remember that there is a 60 day reporting requirement if there is any capital gains tax payable.

[@darrenlahr1819]

This was a very insightful video, thank you. Have a query about how I would apply these calculations to my situation. I have lived in a property owned by my parents jointly which was purchased 25 years ago, this is a shared ownership where 50% of the property is owned by them and the rest by a housing association. My dad passed away and I inherited his share about 6 months back. How would I calculate PRR given this assuming I sell? Namely following your example what purchase price should I use? Would I use the value of the property at the time I inherited his share? Or would I need to use the original purchase price from 25 years ago? Also am I right in assuming that I would scale this numbers to align with the fact that I own '25%' of the property? Thank you!

[@kimberleyshapcottpropertytax]

You would take the value that you inherited it at. A valuation would need to be done at this point in time to assess what the value was at his passing. You only need to account for 25% of the gain in your calculation as it is based on what you own of the property.

[@leephillips589]

Hello Kimberley, I have recently sold my 1 bed leasehold BTL flat in the UK 30th April 2024. I am a British citizen paying tax to HMRC UK and the ATO Australia. Having lived in he flat from 2005 to 2015 I am struggling to find any invoices for costs purchashing, solicitors - conveyancing. Also costs for attributing gains for installation of double glazing from 2006. The previous windows were single metal framed. So surely a gain and improvement? So can I estimate these costs? Clock is ticking until i submit on the 1t of June 2024. Thanks for advie on this video. One of the few that actually says it straight

[@kimberleyshapcottpropertytax]

I would suggest you include the best estimates you can and then see what you can find as evidence even if it is the bank transactions on bank statements. This is in case HMRC would like to see evidence. If none can be found then they would look to disallow any expenses that have no evidence if any questions are asked.

[@dubstar14]

Bless you Kimberley! I've been tearing my hair out for days trying to get my head around calculating PPR and you explained it clearly in 5 minutes.Thank you so much.

[@kimberleyshapcottpropertytax]

You are welcome.

[@junleichapman489]

Hi Kimberly thank you sso much for the video, v helpful. So i sale the flat i have been living to spv them move to a new house i buy within 9 months then no need to pay CGT?

[@kimberleyshapcottpropertytax]

There is a 9 month period you have after you move out to transfer the property without incurring any capital gains tax. This will be slightly longer as you have your capital gains allowance of £3,000 however depends on the gain that you have on the property.

[@mustafahaider4329]

Please add if i have missed any technical or non technical point or correct me if my understanding is wrong

[@kimberleyshapcottpropertytax]

Check out the video on PPR on the channel which goes into more detail on the actual relief rather than this video which focuses on where it is brought into the capital gains tax calculation.

[@crriding5859]

Hi, I lived outside the UK for a number of years and rented out my main residence over 2 periods (9 years + 5 years out of 23 years ownership). I know I can claim PRR for the rental periods, but because of working abroad, am I exempt from CGT? (I've had different views!) Excellent videos by the way!

[@kimberleyshapcottpropertytax]

The key thing I can suggest from your comment is that you look at whether the reason you have been away is for any of the reasons for exemption that allow you to include this period within the PPR relief or not. If not for that period that it was rented there will be Capital Gains tax Payable.

[@mustafahaider4329]

Further in order to claim the absence period for 3-4 years you must occupy this property as a main residence before selling . Another point is as this is UK residential property and if you will be non resident in the selling tax year (not sure either residence status will be considered on selling date or for relevant tax year) , then you will also need to report the disposal (CGT) to HMRC within 60 days from the date of completion of regardless if there is a loss, gain or no gain/ loss. If there will be Capital gain tax that also must be paid within 60 days separately to HMRC. Being a non resident and buying the property before 5 April 2015, you will have an opportunity to calculate the CGT which is the Retrospective method, time apportionment method and rebase method and you can choose the most suitable method for CGT calculation.

[@mustafahaider4329]

Thanks for this video Let me add little bit more for your audience that, if someone eligible for PPR relief . On that property if owner come back to that property and occupy that property again even I think for a single day before selling, then further 3-4 years will be allowed to take as a living period . 3 years for any reason leaving that property and for 4 years there are some specific / qualifying reasons to leave that property. Normally people become eligible for 3 years as it is based on any reason instead of specific reasons 😊

[@kimberleyshapcottpropertytax]

I believe you are thinking of the old tax rules which did not require you live there again and was available when you sold the property. The 3 year or 36 month allowances in the rules were reduced to 18 months and then further reduced to 9 months which is shown in the calculation in the video. Check out the video on PPR on the channel which goes into more detail on the actual relief rather than this video which focuses on where it is brought into the capital gains tax calculation.

[@mustafahaider4329]

@@kimberleyshapcottpropertytax Another thing please note that I am not arguing with you because you are senior in UK accountancy and tax field. I am talking like your junior

[@kimberleyshapcottpropertytax]

If there any other questions just let me know. Tax is an ever changing environment with allowances changing and staying the same making planning interesting at times. Thanks for your feedback and messages. I hope you are finding all the videos useful.

[@mustafahaider4329]

@@kimberleyshapcottpropertytax definitely I found this video informative

[@mustafahaider4329]

@@kimberleyshapcottpropertytax is there anyway I can contact other than comments