Everything You Need To Know About Tax Costs
Moving home can be stressful. Uprooting to downsize, make room for that new arrival or finally settling into retirement comes with a wide range of expenses and worries, not least of which concern tax costs.
Buying and selling property is wrought with pitfalls and unexpected expenditures and standard taxation will be placed on all services, including VAT on conveyancing charges, solicitors and estate agency fees. Make sure you get every quote in writing so you can read through those terms and conditions thoroughly before you agree to any work being done.
Stamp Duty Land Tax plays a key role in the purchase of a new property exceeding the value of £125,000 and is charged at a rate of anywhere between 1% to 7% on the purchase price. But what taxation specifically applies to selling a home?
Capital Gains Tax
Capital Gains tax (CGT) applies to the gains made from a sale or transfer of a property. Depending on an individual’s total taxable income this could be charged at a rate anywhere between 18% and 28%. For trustees acting on behalf of a person who has passed away, as an executor or administrator, this rate is typically charged at 28%.
But it’s not all doom and gloom, Capital Gains Tax will only apply on a property that is not your main residence under the Private Residence Relief clause and would also not be applicable to sales or transfers made to a spouse or Civil Partner.
There is also an annual tax free allowance for 2013-2014 of £10,900 for individuals and £5,450 for most trustees on any assets, which are both up from the previous year.
For more information on how to calculate your own CGT, comprehensive guides are available on
www.gov.uk/capital-gains-tax/overview
Inheritance Tax
This taxation will only apply to estates left behind following a bereavement. Currently the threshold is set at £325,000, meaning that only assets breaching this amount will be subject to taxation.
To prepare for this you may want to consider gifting a property to a loved one or family member. Providing the gift was made seven years prior to death, it will be exempt from Inheritance tax.
For more information on how to prepare and calculate Inheritance tax, peruse the HMRC inheritance tax guide, www.gov.uk/inheritance-tax/overview.
Tax is never fun and no matter how you dress it up, it always feels like a bit of a kick in the teeth. But get yourself educated and do your research on what may apply to you and you’ll find that tax doesn’t have to make a good move go wrong.
