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Finances / Finanzen » uk.finance » Taper Relief Confusion!
| Taper Relief Confusion! [message #368649] |
Sa, 11 März 2006 21:58 |
|
I'm totally confused about Taper Relief.
I bought a second home in October 1996. It's a non-business asset. I
understand that the taper relief is increased by 1 year for assets held
before 5/4/98.
In my situation, does this mean that I reach maximum taper relief of 40% if
I sell the house after 5/4/2006?
Also, I've searched but not found this - is there such a thing as a CGT
calculator that takes into account indexation prior to taper releif and does
a rough cgt calc?
Any pointers appreciated.
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| Re: Taper Relief Confusion! [message #368652 ] |
So, 12 März 2006 00:38 |
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On Sat, 11 Mar 2006 20:58:45 -0000, "Sharon Derben"
<sharon [at] nospam.com> wrote:
>I'm totally confused about Taper Relief.
>
>I bought a second home in October 1996. It's a non-business asset. I
>understand that the taper relief is increased by 1 year for assets held
>before 5/4/98.
>
>In my situation, does this mean that I reach maximum taper relief of 40% if
>I sell the house after 5/4/2006?
>
>Also, I've searched but not found this - is there such a thing as a CGT
>calculator that takes into account indexation prior to taper releif and does
>a rough cgt calc?
Try http://www.hmrc.gov.uk/rates/cgt.htm for a start, then
http://www.hmrc.gov.uk/leaflets/c4.htm for more information.
--
Terry Harper
URL: http://www.btinternet.com/~terry.harper/
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| Re: Taper Relief Confusion! [message #368654 ] |
So, 12 März 2006 08:39 |
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Thanks for the pointers Terry, very much appreciated.
I had already found the information and as I said I was confused by it. I
had calculated as I said that I thought the rules indicated that I acheived
maximum relief for my purchase in October 96 if I disposed after 5/4/2006.
I was hoping someone that knew about these things could merely confirm I'd
understood the rules correctly.
Thanks again
SD
"Terry Harper" <terry.harper [at] btinternet.com> wrote in message
news:rpn61299d0o5ogabblau9kl302m4418r1r [at] 4ax.com...
> On Sat, 11 Mar 2006 20:58:45 -0000, "Sharon Derben"
> <sharon [at] nospam.com> wrote:
>
>>I'm totally confused about Taper Relief.
>>
>>I bought a second home in October 1996. It's a non-business asset. I
>>understand that the taper relief is increased by 1 year for assets held
>>before 5/4/98.
>>
>>In my situation, does this mean that I reach maximum taper relief of 40%
>>if
>>I sell the house after 5/4/2006?
>>
>>Also, I've searched but not found this - is there such a thing as a CGT
>>calculator that takes into account indexation prior to taper releif and
>>does
>>a rough cgt calc?
>
> Try http://www.hmrc.gov.uk/rates/cgt.htm for a start, then
> http://www.hmrc.gov.uk/leaflets/c4.htm for more information.
> --
> Terry Harper
> URL: http://www.btinternet.com/~terry.harper/
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| Re: Taper Relief Confusion! [message #368656 ] |
So, 12 März 2006 11:35 |
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In message <4413d069$0$6977$ed2619ec [at] ptn-nntp-reader02.plus.net>, Sharon
Derben <sharon [at] nospam.com> writes
>Thanks for the pointers Terry, very much appreciated.
>
>I had already found the information and as I said I was confused by it. I
>had calculated as I said that I thought the rules indicated that I acheived
>maximum relief for my purchase in October 96 if I disposed after 5/4/2006.
>I was hoping someone that knew about these things could merely confirm I'd
>understood the rules correctly.
>
>Thanks again
You get indexation relief from Oct 96 to Mar 98, then taper relief from
Apr 98 onwards. The 'number of years held' for taper purposes is the
number of complete years starting 4/98.
--
John Boyle
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| Re: Taper Relief Confusion! [message #368662 ] |
So, 12 März 2006 15:25 |
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Are you sure it's that simple? A bonus year is mentioned for holdings
before 4/98. Thats why I've been asking whether my calculations are
correct.
"john boyle" <john [at] johnboyle1.demon.co.uk> wrote in message
news:Wavo1LM5l$EEFwYY [at] johnboyle1.demon.co.uk...
> In message <4413d069$0$6977$ed2619ec [at] ptn-nntp-reader02.plus.net>, Sharon
> Derben <sharon [at] nospam.com> writes
>>Thanks for the pointers Terry, very much appreciated.
>>
>>I had already found the information and as I said I was confused by it. I
>>had calculated as I said that I thought the rules indicated that I
>>acheived
>>maximum relief for my purchase in October 96 if I disposed after 5/4/2006.
>>I was hoping someone that knew about these things could merely confirm I'd
>>understood the rules correctly.
>>
>>Thanks again
>
> You get indexation relief from Oct 96 to Mar 98, then taper relief from
> Apr 98 onwards. The 'number of years held' for taper purposes is the
> number of complete years starting 4/98.
> --
> John Boyle
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| Re: Taper Relief Confusion! [message #368663 ] |
So, 12 März 2006 17:38 |
|
Sharon Derben wrote:
> Are you sure it's that simple? A bonus year is mentioned for holdings
> before 4/98. Thats why I've been asking whether my calculations are
> correct.
Yes, it is that simple. Alas, your calculation is off by 1 year.
In effect you get 5% taper relief for each complete year after
05/04/98 except that the first two such years don't count.
For maximum 40% relief an asset must have been held for at least 8
years which count, which in general means 10 years after 04/98.
You get a "bonus year" for assets held prior to ??/03/98 (when the
scheme was announced).
You can think of the bonus year as either increasing the number
of years which count by 1, or reducing the number of years which
don't count from 2 to 1, but not both.
If you qualify for the bonus year, then maximum relief is achievable
one year earlier than without. Thus you need to hold the asset for
9 years after 04/98 instead of 10.
To get maximum relief in bonus-year circumstances, the sale would
have to take place on or after 6th April 2007, because 1998+9=2007.
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| Re: Taper Relief Confusion! [message #368667 ] |
So, 12 März 2006 19:02 |
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In message <44142f82$0$3600$ed2e19e4 [at] ptn-nntp-reader04.plus.net>, Sharon
Derben <sharon [at] nospam.com> writes
>Are you sure it's that simple? A bonus year is mentioned for holdings
>before 4/98. Thats why I've been asking whether my calculations are
>correct.
Yes it is that simple, and you DO get the bonus year because you
acquired the asset before 17 March 1998.
If you bought in Oct 96 then the indexation allowance was .057
(according to terry's link) This means you multiply the purchase price
by 1.057 giving the indexed purchase price - P.
If you were to sell today there would be 8 full tax years since April
1998 plus one bonus year making 9 full years making 35% relief.
You then deduct the indexed purchase price from the net sales proceeds
to obtain the 'gain'. You then reduce the gain by 35%. You then deduct
the annual allowance of £8500 and if there is anything left this is
taxed. In order to determine the rate of CGT that you pay, the taxable
gain is added to your current years taxable income and taxed as though
it was the 'top slice', so if you were a basic rate income tax payer the
first part of the gain up to the threshold for the higher rate would be
taxed at basic rate and the remainder at 40%
--
John Boyle
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| Re: Taper Relief Confusion! [message #368678 ] |
So, 12 März 2006 23:52 |
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john boyle wrote:
> Yes it is that simple, and you DO get the bonus year because you
> acquired the asset before 17 March 1998.
>
> If you were to sell today there would be 8 full tax years since April
> 1998 plus one bonus year making 9 full years making 35% relief.
I suppose living in the future is one way of rebutting hypothetical
accusations of being an old-timer living in the past, but I suggest
it might have the unwanted side-effect of being labelled a loony.
Actually there would be only 7 full years, unless you're using
"today" as an abbreviation for "about three and a half weeks
from today".
Also the number of tax years is irrelevant. Qualifying years are just
whole years starting on any old day. An asset bought on 1st June 2001
and sold on 3rd July 2004 would have been held for (a little over)
three whole years for taper relief purposes, even though that period
only contains two whole tax years.
Of course in the case of assets acquired prior to 6/4/98, a holding
period of any number of whole years will ipso facto, but only
coincidentally, also contain the same number of whole tax years.
Happy New Year! (Oops)
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| Re: Taper Relief Confusion! [message #368679 ] |
So, 12 März 2006 23:52 |
|
In message <OH1Rf.34902$wl.18631 [at] text.news.blueyonder.co.uk>, Ronald
Raygun <no.spam [at] localhost.localdomain> writes
>john boyle wrote:
>
>> Yes it is that simple, and you DO get the bonus year because you
>> acquired the asset before 17 March 1998.
>>
>> If you were to sell today there would be 8 full tax years since April
>> 1998 plus one bonus year making 9 full years making 35% relief.
>
>I suppose living in the future is one way of rebutting hypothetical
>accusations of being an old-timer living in the past, but I suggest
>it might have the unwanted side-effect of being labelled a loony.
>
>Actually there would be only 7 full years, unless you're using
>"today" as an abbreviation for "about three and a half weeks
>from today".
Yes!! Quite right!
>
>Also the number of tax years is irrelevant.
Ah! But not in this case.
> Qualifying years are just
>whole years starting on any old day. An asset bought on 1st June 2001
>and sold on 3rd July 2004 would have been held for (a little over)
>three whole years for taper relief purposes, even though that period
>only contains two whole tax years.
>
>Of course in the case of assets acquired prior to 6/4/98, a holding
>period of any number of whole years will ipso facto, but only
>coincidentally, also contain the same number of whole tax years.
>
Ah yes, thats the point! Any asset acquired under the old regime will
need to have been held for full tax years!
>Happy New Year! (Oops)
>
And happy birthday! (Perhaps i can use the above to make myself appear
somewhat younger........ perhaps if age were to be counted in tax years,
not actual years..... perhaps...............
--
John Boyle
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| Re: Taper Relief Confusion! [message #373470 ] |
Mo, 13 März 2006 08:02 |
|
Many thanks for all the help. Such a simple concept defeated me - but it
looks like I'll be keeping this until after 4/98.
To make sure I have understood all that was said (some of what was posted I
think might be clear to those whop already understand it but moi .......)
............
If I bought the asset in October 96, does the maximim relief occur if I sell
it after 6/4/07 or after say October/07?
Many thanks.
SD
"Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
news:D8YQf.34691$wl.19323 [at] text.news.blueyonder.co.uk...
> Sharon Derben wrote:
>
>> Are you sure it's that simple? A bonus year is mentioned for holdings
>> before 4/98. Thats why I've been asking whether my calculations are
>> correct.
>
> Yes, it is that simple. Alas, your calculation is off by 1 year.
>
> In effect you get 5% taper relief for each complete year after
> 05/04/98 except that the first two such years don't count.
>
> For maximum 40% relief an asset must have been held for at least 8
> years which count, which in general means 10 years after 04/98.
>
> You get a "bonus year" for assets held prior to ??/03/98 (when the
> scheme was announced).
>
> You can think of the bonus year as either increasing the number
> of years which count by 1, or reducing the number of years which
> don't count from 2 to 1, but not both.
>
> If you qualify for the bonus year, then maximum relief is achievable
> one year earlier than without. Thus you need to hold the asset for
> 9 years after 04/98 instead of 10.
>
> To get maximum relief in bonus-year circumstances, the sale would
> have to take place on or after 6th April 2007, because 1998+9=2007.
>
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| Re: Taper Relief Confusion! [message #373476 ] |
Mo, 13 März 2006 11:49 |
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Sharon Derben wrote:
> Many thanks for all the help. Such a simple concept defeated me - but it
> looks like I'll be keeping this until after 4/98.
>
> To make sure I have understood all that was said (some of what was posted
> I think might be clear to those whop already understand it but moi
> .......) ...........
>
> If I bought the asset in October 96, does the maximim relief occur if I
> sell it after 6/4/07 or after say October/07?
After 5/4/07, that is to say on or after 6/4/07.
It doesn't matter how long you've actually owned it in total
(well, that's not quite true, but it is true when looking only
at taper relief); taper relief only applies to years from 6/4/98,
when the taper relief regime came in and replaced the indexation
allowance regime.
By the way, tax minimisation is not the be all and end all.
The aim of the game is to maximise your after-tax proceeds.
Whilst waiting an extra year will give you the 8th and final 5%
tranche of TR, you need to look at the whole picture. If there
is reason to suspect that the property might not sell as
easily or for as much money next year than this year, there is
a possibility that although there will be less tax to pay next year,
you'd still end up with less money.
For example, suppose you bought the place for £97k plus other costs
(survey/solicitor fees, stamp duty, etc) of £3k. Suppose the personal
CGT exempt amount (which is £8500 for 2005/06) is £8.8k for 2006/07 and
£9.1k for the year after. Suppose you could sell it next month for
£200k net (e.g. £205k less estate agent's cut of £5k), but if you
waited until next year you could only get £190k net.
Case 1: Sell this calendar year (but next tax year, i.e. next month)
Raw gain is 200k - 100k = 100k
Less indexation allowance of 5.7k gives indexed gain of 94.3k
Less 35% taper relief of 33k gives tapered gain of 61.3k
Less exempt amount 8.8k leaves amount subject to CGT of 52.5k
Suppose your income is such that 10k of this taxable at 20% and
the rest (42.5k) at 40%, then your tax bill will be 2k + 17k = 19k
and this leaves 200k - 19k = 181k in your pocket.
Case 2: Sell one year later
Raw gain 190k - 100k = 90k
Less IA of 5.7k gives 84.3k
Less 40% TR of 33.7k gives 50.6k
Less EA of 9.1k gives 41.5k
10k at 20% and 31.5k at 40%: 2k + 12.6k = 14.6k
Cash proceeds: 190k - 14.6k = 175.4k
So you see that even though you're paying £4400 less tax you still
end up with £5600 less money in your pocket. Moreover, this year's
181k, put into a bank earning 4.5% interest (3.6% net) will be worth
187.5k next year, so your shortfall due to waiting would be 12.1k.
Case 3: As case 2 but sell for 210k
Raw gain 210k - 100k = 110k
Less IA: 104.3k
Less 40% TR of 41.7k gives 62.6k
Less EA of 9.1k gives 53.5k
10k [at] 20% and 43.5k [at] 40%: 2k + 17.4k = 19.4k
In hand: 210k - 19.4k = 190.6k
This is only £3100 more than next year's value of the case 1 proceeds,
despite getting £10k more from the sale, and despite getting £8700 more
taper relief.
If you really want to cut your tax bill, make the place your main home
before selling it. But seeing as you would only save of the order of
£19k you may not think the hassle worth while.
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| Re: Taper Relief Confusion! [message #373478 ] |
Mo, 13 März 2006 12:01 |
|
john boyle wrote:
> And happy birthday! (Perhaps i can use the above to make myself appear
> somewhat younger........ perhaps if age were to be counted in tax years,
> not actual years..... perhaps...............
True, it could make you appear almost two years younger.
If your birthday were 7th April, then on 4th April (3 days
before your 62nd birthday) your tax age would still be 60.
|
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| Re: Taper Relief Confusion! [message #373480 ] |
Mo, 13 März 2006 12:42 |
|
Thanks very much Ronald for taking so much trouble.
The property will near enough always sell well. It's a prime postion
sea-edge property that has increased in value by 13% compound for the last
10 years.
I've spreadsheet this and it seems to me that as an investment it makes
sense to keep it for as long as I can.
In a year or so I've earned maximim taper relief which essentially means
that after our joint annual cgt allowance is pooled (we're joint owners), we
will only ever accumulate a potential liability of 40% of 60% ie 24% of any
gain. My calculation is that if I sold in a year or so, I'd pay roughly
£50k cgt on a current value of around £360k. As I'm a relatively cautious
investor, early retired, it seems that the capital appreciation rolling up
in this second house is better than I could do if the cash were in the bank,
and I can use it as well. The compound effect means that in a way it's
providing a net increase in capital of approximately £30k per year which
compounds up sharply. 10 years from now, if property prices increase by 10%
average each year, my net annual gain could be around £60k after any cgt
that might be paid. If I made the mistake of getting itchy feet and sold
and bought somewhere else, I'd be realising the CGT obligation traight away,
and starting on the taper relief ladder from scratch. Because of buying,
selling and stamp duty costs - as well as the cgt hit the replacement
property would be cheaper than my current one. The start again with taper
relief means I should then really be locked in again. So everything points
to simply enjoying the property until I NEED to sell it.
Thanks again for your time.
SD
"Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
news:07cRf.35082$wl.20983 [at] text.news.blueyonder.co.uk...
> Sharon Derben wrote:
>
>> Many thanks for all the help. Such a simple concept defeated me - but it
>> looks like I'll be keeping this until after 4/98.
>>
>> To make sure I have understood all that was said (some of what was posted
>> I think might be clear to those whop already understand it but moi
>> .......) ...........
>>
>> If I bought the asset in October 96, does the maximim relief occur if I
>> sell it after 6/4/07 or after say October/07?
>
> After 5/4/07, that is to say on or after 6/4/07.
>
> It doesn't matter how long you've actually owned it in total
> (well, that's not quite true, but it is true when looking only
> at taper relief); taper relief only applies to years from 6/4/98,
> when the taper relief regime came in and replaced the indexation
> allowance regime.
>
> By the way, tax minimisation is not the be all and end all.
> The aim of the game is to maximise your after-tax proceeds.
>
> Whilst waiting an extra year will give you the 8th and final 5%
> tranche of TR, you need to look at the whole picture. If there
> is reason to suspect that the property might not sell as
> easily or for as much money next year than this year, there is
> a possibility that although there will be less tax to pay next year,
> you'd still end up with less money.
>
> For example, suppose you bought the place for £97k plus other costs
> (survey/solicitor fees, stamp duty, etc) of £3k. Suppose the personal
> CGT exempt amount (which is £8500 for 2005/06) is £8.8k for 2006/07 and
> £9.1k for the year after. Suppose you could sell it next month for
> £200k net (e.g. £205k less estate agent's cut of £5k), but if you
> waited until next year you could only get £190k net.
>
> Case 1: Sell this calendar year (but next tax year, i.e. next month)
>
> Raw gain is 200k - 100k = 100k
> Less indexation allowance of 5.7k gives indexed gain of 94.3k
> Less 35% taper relief of 33k gives tapered gain of 61.3k
> Less exempt amount 8.8k leaves amount subject to CGT of 52.5k
> Suppose your income is such that 10k of this taxable at 20% and
> the rest (42.5k) at 40%, then your tax bill will be 2k + 17k = 19k
> and this leaves 200k - 19k = 181k in your pocket.
>
> Case 2: Sell one year later
>
> Raw gain 190k - 100k = 90k
> Less IA of 5.7k gives 84.3k
> Less 40% TR of 33.7k gives 50.6k
> Less EA of 9.1k gives 41.5k
> 10k at 20% and 31.5k at 40%: 2k + 12.6k = 14.6k
> Cash proceeds: 190k - 14.6k = 175.4k
>
> So you see that even though you're paying £4400 less tax you still
> end up with £5600 less money in your pocket. Moreover, this year's
> 181k, put into a bank earning 4.5% interest (3.6% net) will be worth
> 187.5k next year, so your shortfall due to waiting would be 12.1k.
>
> Case 3: As case 2 but sell for 210k
>
> Raw gain 210k - 100k = 110k
> Less IA: 104.3k
> Less 40% TR of 41.7k gives 62.6k
> Less EA of 9.1k gives 53.5k
> 10k [at] 20% and 43.5k [at] 40%: 2k + 17.4k = 19.4k
> In hand: 210k - 19.4k = 190.6k
>
> This is only £3100 more than next year's value of the case 1 proceeds,
> despite getting £10k more from the sale, and despite getting £8700 more
> taper relief.
>
> If you really want to cut your tax bill, make the place your main home
> before selling it. But seeing as you would only save of the order of
> £19k you may not think the hassle worth while.
>
|
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| Re: Taper Relief Confusion! [message #373483 ] |
Mo, 13 März 2006 13:15 |
|
> john boyle wrote:
> > And happy birthday! (Perhaps i can use the above to make
> > myself appear somewhat younger........ perhaps if age were
> > to be counted in tax years, not actual years..... perhaps...............
>
"Ronald Raygun" wrote
> True, it could make you appear almost two years younger.
> If your birthday were 7th April, then on 4th April (3 days
> before your 62nd birthday) your tax age would still be 60.
.... but your "real age" would be only
*61*, hence only *one* year different.
[When only counting **whole years** for
both. It cannot be fair to count part-years for
"real age" and only whole years for "tax age"!!]
Unless you count part-years for both, in which case.......... ;-)
|
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| Re: Taper Relief Confusion! [message #373486 ] |
Mo, 13 März 2006 13:48 |
|
Tim wrote:
>> john boyle wrote:
>> > And happy birthday! (Perhaps i can use the above to make
>> > myself appear somewhat younger........ perhaps if age were
>> > to be counted in tax years, not actual years.....
>> > perhaps...............
>>
> "Ronald Raygun" wrote
>> True, it could make you appear almost two years younger.
>> If your birthday were 7th April, then on 4th April (3 days
>> before your 62nd birthday) your tax age would still be 60.
>
> ... but your "real age" would be only
> *61*, hence only *one* year different.
Well, I did say *almost* two years.
> [When only counting **whole years** for
> both. It cannot be fair to count part-years for
> "real age" and only whole years for "tax age"!!]
Oh yes it can. Tax is unfair, so it's fair to be unfair back.
I wonder how old old JB really is. In fractional years,
whole years, tax years, I don't care, a ball park figure
will do. I suspect 62 isn't far wrong, which would make him
*much* older than me.
|
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| Re: Taper Relief Confusion! [message #373488 ] |
Mo, 13 März 2006 13:48 |
|
In message <44155ad3$0$3604$ed2e19e4 [at] ptn-nntp-reader04.plus.net>, Sharon
Derben <sharon [at] nospam.com> writes
>if property prices increase by 10% average each year,
IIRC, it tends towards 5% compound
--
Richard Faulkner
|
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| Re: Taper Relief Confusion! [message #373528 ] |
Mo, 13 März 2006 20:01 |
|
In message <44155ad3$0$3604$ed2e19e4 [at] ptn-nntp-reader04.plus.net>, Sharon
Derben <sharon [at] nospam.com> writes
>Thanks very much Ronald for taking so much trouble.
>
>The property will near enough always sell well. It's a prime postion
>sea-edge property that has increased in value by 13% compound for the last
>10 years.
>
>I've spreadsheet this and it seems to me that as an investment it makes
>sense to keep it for as long as I can.
>
>In a year or so I've earned maximim taper relief which essentially means
>that after our joint annual cgt allowance is pooled (we're joint owners), we
>will only ever accumulate a potential liability of 40% of 60% ie 24% of any
>gain. My calculation is that if I sold in a year or so, I'd pay roughly
>£50k cgt on a current value of around £360k. As I'm a relatively cautious
>investor, early retired, it seems that the capital appreciation rolling up
>in this second house is better than I could do if the cash were in the bank,
>and I can use it as well. The compound effect means that in a way it's
>providing a net increase in capital of approximately £30k per year which
>compounds up sharply. 10 years from now, if property prices increase by 10%
>average each year, my net annual gain could be around £60k after any cgt
>that might be paid. If I made the mistake of getting itchy feet and sold
>and bought somewhere else, I'd be realising the CGT obligation traight away,
>and starting on the taper relief ladder from scratch. Because of buying,
>selling and stamp duty costs - as well as the cgt hit the replacement
>property would be cheaper than my current one. The start again with taper
>relief means I should then really be locked in again. So everything points
>to simply enjoying the property until I NEED to sell it.
Sharon, have you thought of moving into the second house and living
there for a bit? Even if only nominally?
--
John Boyle
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| Re: Taper Relief Confusion! [message #373530 ] |
Mo, 13 März 2006 20:36 |
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Many thanks John,
I thought that the acceptance of a house as a principal residence had a
couple of conditions:
1. the property must not have been purchased for the sole reason of making a
profit and
2. that to be exempt the house must be an individual's only or main
residence throughout the period of ownership
If this is correct I'd fall foul of (2) if I were unable to prove genuine
occupation, by for example turning all heat and electric off our genuine
main house and turn everything on in the second smaller house to produce
some utility proof. There is no chance of a genuine real move to the second
home so I think it's a dead dog but thanks for the thought
SD
"john boyle" <john [at] johnboyle1.demon.co.uk> wrote in message
news:FYdMVHL3FcFEFwjw [at] johnboyle1.demon.co.uk...
> In message <44155ad3$0$3604$ed2e19e4 [at] ptn-nntp-reader04.plus.net>, Sharon
> Derben <sharon [at] nospam.com> writes
>>Thanks very much Ronald for taking so much trouble.
>>
>>The property will near enough always sell well. It's a prime postion
>>sea-edge property that has increased in value by 13% compound for the last
>>10 years.
>>
>>I've spreadsheet this and it seems to me that as an investment it makes
>>sense to keep it for as long as I can.
>>
>>In a year or so I've earned maximim taper relief which essentially means
>>that after our joint annual cgt allowance is pooled (we're joint owners),
>>we
>>will only ever accumulate a potential liability of 40% of 60% ie 24% of
>>any
>>gain. My calculation is that if I sold in a year or so, I'd pay roughly
>>£50k cgt on a current value of around £360k. As I'm a relatively cautious
>>investor, early retired, it seems that the capital appreciation rolling up
>>in this second house is better than I could do if the cash were in the
>>bank,
>>and I can use it as well. The compound effect means that in a way it's
>>providing a net increase in capital of approximately £30k per year which
>>compounds up sharply. 10 years from now, if property prices increase by
>>10%
>>average each year, my net annual gain could be around £60k after any cgt
>>that might be paid. If I made the mistake of getting itchy feet and sold
>>and bought somewhere else, I'd be realising the CGT obligation traight
>>away,
>>and starting on the taper relief ladder from scratch. Because of buying,
>>selling and stamp duty costs - as well as the cgt hit the replacement
>>property would be cheaper than my current one. The start again with taper
>>relief means I should then really be locked in again. So everything
>>points
>>to simply enjoying the property until I NEED to sell it.
>
> Sharon, have you thought of moving into the second house and living there
> for a bit? Even if only nominally?
>
> --
> John Boyle
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| Re: Taper Relief Confusion! [message #373531 ] |
Mo, 13 März 2006 22:19 |
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In message <4415c9c5$0$6963$ed2619ec [at] ptn-nntp-reader02.plus.net>, Sharon
Derben <sharon [at] nospam.com> writes
>Many thanks John,
>
>I thought that the acceptance of a house as a principal residence had a
>couple of conditions:
>
>1. the property must not have been purchased for the sole reason of making a
>profit and
>
>2. that to be exempt the house must be an individual's only or main
>residence throughout the period of ownership
>
>If this is correct I'd fall foul of (2) if I were unable to prove genuine
>occupation, by for example turning all heat and electric off our genuine
>main house and turn everything on in the second smaller house to produce
>some utility proof. There is no chance of a genuine real move to the second
>home so I think it's a dead dog but thanks for the thought
My book has different definitions.
1) A dwelling house (or part of it) which is, or has has at any time in
the period of ownership been, his only or main residence or
2) land which... (not relevant)
see http://www.hmrc.gov.uk/helpsheets/ir283.pdf
--
John Boyle
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| Re: Taper Relief Confusion! [message #373539 ] |
Di, 14 März 2006 00:04 |
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Sharon Derben wrote:
>> Sharon, have you thought of moving into the second house and living there
>> for a bit? Even if only nominally?
>> John Boyle
I don't think "nominally" is an option. The opportunity for making a
PPR election having been missed long ago, the only hope for acquiring
PPR status would be by the "based on the facts" route, wouldn't it?
> I thought that the acceptance of a house as a principal residence had a
> couple of conditions:
>
> 1. the property must not have been purchased for the sole reason of making
> a profit and
>
> 2. that to be exempt the house must be an individual's only or main
> residence throughout the period of ownership
The "throughout" in (2) applies only if you want it to be automatically
fully exempt. You can get partial exemption based on duration of "main
residence" status. E.g. if you own a house for 10 years and use it as a
holiday home for the first 5 and as a main home for the last 5, then half
your gain would be exempt, and only the other half of your gain would go
through the mill of taper relief etc.
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| Re: Taper Relief Confusion! [message #373561 ] |
Di, 14 März 2006 09:59 |
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On Mon, 13 Mar 2006 07:02:47 -0000, "Sharon Derben"
<sharon [at] nospam.com> wrote:
>Many thanks for all the help. Such a simple concept defeated me - but it
>looks like I'll be keeping this until after 4/98.
>
I'm sure you will!
--
Peter Saxton from London
peter [at] petersaxton.co.uk
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| Re: Taper Relief Confusion! [message #373594 ] |
Di, 14 März 2006 20:37 |
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On Mon, 13 Mar 2006 19:36:10 -0000, "Sharon Derben"
<sharon [at] nospam.com> wrote:
>Many thanks John,
>
>I thought that the acceptance of a house as a principal residence had a
>couple of conditions:
>
>1. the property must not have been purchased for the sole reason of making a
>profit and
>
>2. that to be exempt the house must be an individual's only or main
>residence throughout the period of ownership
>
A house isn't exempt or not exempt. It's a period of ownership which
is exempt or not exempt.
You may be able to claim as exempt the following:
up to a maximum of three years during building work or sale of
previous property,
last three years of ownership,
needing to live elsewhere or abroad because of job, or
periods totalling up to three years for any reason.
--
Peter Saxton from London
peter [at] petersaxton.co.uk
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