Question

Calculate the Capital Gains Tax due on the following disposal and select the correct amount from the list below:

Ashley disposed of a buy-to-let property for £210,000 on 1 September 2020. The solicitors' and agents' fees on the sale amounted to £1,500. He acquired the house in 2005 for £80,000, incurring solicitors' fees of £500. He carried out a full renovation of the property costing £24,000.

Ashley had employment income for the 2020/21 tax year of £50,000.

Answer 1

Computation of capital gains:

Full value of Consideration. : 210,000

Less: Agent's fee. : (1500)

Net value of Consideration . (A) : 208,500

Less:

Cost of acquisition of building : 80,000

Cost of improvement : 24,000

Agent's fee paid for purchase: 500

Total cost of Building.     : 124,500

Since building was acquired in 2005 and sold on 2020 which means the usage of asset is more than 36 months, hence it is long term capital asset and the gains from the asset are Long Term capital gains.

In long term capital asset, the cost of asset should be indexed

Indexed cost of asset = cost of asset * indexed value in the year of sale / indexed value in the year of purchase

Indexed value for 2005 = 117 , 2020 = 301

Indexed cost = 124,500* 301/117 = 320,295

Capital Gains/(Loss)   = A - B = 208500 - 320295

= ( 111, 795)