Capital Gain Tax on a Sale of property

IamCait

Hi All,

I wondering if someone can help me with CGT.

I bought two properties back in 2012 and 2013, due to the fact that i got them at a very good price both properties are now selling for at least double what i paid which is great news. Now my main question is this, what sort of relief would i get if i sold them after the 7 year period?

Correct me if i'm wrong but my taken on the CGT is as follows, any property or land purchased before December 2013 (new budget brought it up to 2014) were charged at 30% capital gains and anything after is 33%. Now under the new rules the property or land must be in your possession for at least 7 years to claim the relief...yes? If so, what sort of amount am i entitled to qualify for at the 7 year period? A number i keep seeing is €1,270 per taxable year. So am i correct in saying, if house A which was bought for 100K was sold after the 7th year for 150k should get a relief of €1,270 per year over the 7 years totalling €8,890? Then a charge of 30% is deduced from the 50K profit?

I'd greatly appreciate it if someone could shine some light on this for me, thank you!

barneystinson

IamCait wrote: »

Hi All,

I wondering if someone can help me with CGT.

I bought two properties back in 2012 and 2013, due to the fact that i got them at a very good price both properties are now selling for at least double what i paid which is great news. Now my main question is this, what sort of relief would i get if i sold them after the 7 year period?

Correct me if i'm wrong but my taken on the CGT is as follows, any property or land purchased before December 2013 (new budget brought it up to 2014) were charged at 30% capital gains and anything after is 33%. Now under the new rules the property or land must be in your possession for at least 7 years to claim the relief...yes? If so, what sort of amount am i entitled to qualify for at the 7 year period? A number i keep seeing is €1,270 per taxable year. So am i correct in saying, if house A which was bought for 100K was sold after the 7th year for 150k should get a relief of €1,270 per year over the 7 years totalling €8,890? Then a charge of 30% is deduced from the 50K profit?

I'd greatly appreciate it if someone could shine some light on this for me, thank you!

You're almost completely misunderstanding how it works.

€1,270 is the annual allowance, the amount of gains you can have in any one year, before you start getting taxed. When you sell a property as in your example and make a gain of 50k, you make that gain once, in the year you sell, so 50k - 1270 leaves a taxable gain of €48,730.

You're also getting the rates of tax wrong - when you make a gain, CGT applies at the rate in force on date of disposal not date of purchase - presently 33%.

You're also mixing up the annual allowance with the specific property related CGT exemption, which provides for a complete exemption from CGT if the property is held for at least 7 years... so using your example again if you sell now at 150k and make a gain of 50k you pay tax at 33% on 48,730.

Alternatively if the market stagnates until you reach 7 years of ownership and you sell in a few years at 150k, you are exempted from CGT on the sale.

In other words, the relief is extremely valuable.

IamCait

barneystinson wrote: »

You're almost completely misunderstanding how it works.

€1,270 is the annual allowance, the amount of gains you can have in any one year, before you start getting taxed. When you sell a property as in your example and make a gain of 50k, you make that gain once, in the year you sell, so 50k - 1270 leaves a taxable gain of €48,730.

You're also getting the rates of tax wrong - when you make a gain, CGT applies at the rate in force on date of disposal not date of purchase - presently 33%.

You're also mixing up the annual allowance with the specific property related CGT exemption, which provides for a complete exemption from CGT if the property is held for at least 7 years... so using your example again if you sell now at 150k and make a gain of 50k you pay tax at 33% on 48,730.

Alternatively if the market stagnates until you reach 7 years of ownership and you sell in a few years at 150k, you are exempted from CGT on the sale.

In other words, the relief is extremely valuable.

Wow....ha, i couldn't have been more wrong. I must have been blinded by the lack of relief, hoping it was €1,270 per year! Thanks for clearing that up!

So in short you are telling me after 7 years of waiting you get only €1,270 of your €50k profit yet charged 33% on the profit? If so, there's no way in hell i could justify waiting till then unless the house prices kept rising!

barneystinson

IamCait wrote: »

Wow....ha, i couldn't have been more wrong. I must have been blinded by the lack of relief, hoping it was €1,270 per year! Thanks for clearing that up!

So in short you are telling me after 7 years of waiting you get only €1,270 of your €50k profit yet charged 33% on the profit? If so, there's no way in hell i could justify waiting till then unless the house prices kept rising!

Sigh... that's not what I told you. Don't have time now to explain - read my earlier post again.

newacc2015

IamCait wrote: »

Hi All,

I wondering if someone can help me with CGT.

I bought two properties back in 2012 and 2013, due to the fact that i got them at a very good price both properties are now selling for at least double what i paid which is great news. Now my main question is this, what sort of relief would i get if i sold them after the 7 year period?

Correct me if i'm wrong but my taken on the CGT is as follows, any property or land purchased before December 2013 (new budget brought it up to 2014) were charged at 30% capital gains and anything after is 33%. Now under the new rules the property or land must be in your possession for at least 7 years to claim the relief...yes? If so, what sort of amount am i entitled to qualify for at the 7 year period? A number i keep seeing is €1,270 per taxable year. So am i correct in saying, if house A which was bought for 100K was sold after the 7th year for 150k should get a relief of €1,270 per year over the 7 years totalling €8,890? Then a charge of 30% is deduced from the 50K profit?

I'd greatly appreciate it if someone could shine some light on this for me, thank you!

You could live in them for 2 years each. Which would make them your principle private residence and then sell them CGT free. Some small builders used to do this with small amounts of houses they built

barneystinson

newacc2015 wrote: »

You could live in them for 2 years each. Which would make them your principle private residence and then sell them CGT free. Some small builders used to do this with small amounts of houses they built

How's that going to work?!

IamCait

newacc2015 wrote: »

You could live in them for 2 years each. Which would make them your principle private residence and then sell them CGT free. Some small builders used to do this with small amounts of houses they built

Really?

I'm due to move into one of them come April so if this is true it would be great.

IamCait

barneystinson wrote: »

Sigh... that's not what I told you. Don't have time now to explain - read my earlier post again.

No need to sigh...when you have time you can explain where i went wrong!

Alan Shore

newacc2015 wrote: »

You could live in them for 2 years each. Which would make them your principle private residence and then sell them CGT free. Some small builders used to do this with small amounts of houses they built

Please explain how this works?

barneystinson

IamCait wrote: »

No need to sigh...when you have time you can explain where i went wrong!

I'm not sure how I can explain it to you any better / differently!

The normal rule, forgetting about the annual allowance, is you pay CGT at 33% on your gains. If you sell now this applies.

There is a specific exemption from CGT which applies to the 2 properties you are talking about, if they were bought in the period specified, and in order for this exemption to apply, they must be held for at least 7 years.

dogsears

Its also important to bear in mind that the CGT exemption that applies where you hold a property for at least 7 years is not an absolute exemption.

If you hold it for exactly 7 years before you sell it the gain is fully exempt. If you sell it after owning it for, say, 10 years, then 7/10 ths of the gain is tax free etc.

barneystinson

dogsears wrote: »

Its also important to bear in mind that the CGT exemption that applies where you hold a property for at least 7 years is not an absolute exemption.

If you hold it for exactly 7 years before you sell it the gain is fully exempt. If you sell it after owning it for, say, 10 years, then 7/10 ths of the gain is tax free etc.

Ah jaysus Dog, I was trying to keep it simple until the basics had been grasped!!

IamCait

dogsears wrote: »

Its also important to bear in mind that the CGT exemption that applies where you hold a property for at least 7 years is not an absolute exemption.

If you hold it for exactly 7 years before you sell it the gain is fully exempt. If you sell it after owning it for, say, 10 years, then 7/10 ths of the gain is tax free etc.

Ok so correct me if i'm wrong again, sorry! So if i sell the two properties exactly 7 years after i purchased them so 2019 and 2020 i will not have any gain tax on either? However id i sell after 8 years i will have to pay 33% on the example of 50k gain?

IamCait

dogsears wrote: »

Its also important to bear in mind that the CGT exemption that applies where you hold a property for at least 7 years is not an absolute exemption.

If you hold it for exactly 7 years before you sell it the gain is fully exempt. If you sell it after owning it for, say, 10 years, then 7/10 ths of the gain is tax free etc.

Ok so correct me if i'm wrong again, sorry! So if i sell the two properties exactly 7 years after i purchased them so 2019 and 2020, i will not have to pay any tax gain on either? However id i sell after 8 years i will have to pay 33% on the example of 50k gain?

barneystinson

IamCait wrote: »

Ok so correct me if i'm wrong again, sorry! So if i sell the two properties exactly 7 years after i purchased them so 2019 and 2020, i will not have to pay any tax gain on either?

Correct

IamCait wrote: »

However id i sell after 8 years i will have to pay 33% on the example of 50k gain?

No, if you sell after more than 7 years then only 7 years' worth of the gain is exempt. So if you sell for a gain of 50k after 10years, then 7/10 is exempt, and you pay tax on 3/10 of the gain I.e. 15k @ 33%

IamCait

barneystinson wrote: »

Correct

No, if you sell after more than 7 years then only 7 years' worth of the gain is exempt. So if you sell for a gain of 50k after 10years, then 7/10 is exempt, and you pay tax on 3/10 of the gain I.e. 15k @ 33%

Apologies I was meant to say I pay 33% on one year or 3 if using the 7/10 example!

Wow so that's good news for me, I really didn't think that the excemption was for the full amount after 7 years. Hopefully the markets continue the way they are and I'll stand to make a nice bit!

However I have a felling they will drop a considerable amount come 2019 and 2020! Well they need too as the market is terrible for first time buyers!

Also are you aware of the rent a room scheme? Like I said I'll be moving into one of my apartments come April with my girlfriend and she will be giving me money for rent. Currently I pay a huge amount to the tax man as both are being rented out but someone told me I don't have to pay any tax when living in it as long as it doesn't go over €12k per year, is this true?