a legal query can anyone help!!?
my best friend has just sold her house and for personal reasons had to move to council accomodation, now she did make a substantial profit from the sale, we were talking this evening with friends and someone said she would have to pay a large amount of tax on the profit, could anyone say if this could be right as she is worried now,as she has had to leave work and was depending on this money, thanks.
Update:actually not a fairy tail, a member of her family is disabled and needed a bungalow and could not afford to privately buy because of the circumstances, try not to make assumptions without the whole story please, this is serious!
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No tax to pay
if the property has been occupied as your friends only or main residence through her period of ownership excluding the last three years of ownership - there is no tax to pay.
If a second home there will be capital gains tax to pay. the sale of the property is what is known as a chargeable asset. The overview is this:
calulate the gain: this is the price your friend received for the house minus the price she paid when she bought it subtracting incidental costs of selling such as estate agent fees, legal costs etc..
she may be entitled to certain reliefs (further deductions) which she will need to check with her solicitor.
from the remaining amount she can deduct her annual exemption which is £8800 ( there is an exemption for an individual for the first £8800 of total net gains made in rhe current tax year)
then it is necessary to apply the relevant rates of tax which are 10%, 20% and 40%
thats a simplified version of the process. Your friend needs to discuss her finances with a solicitor to know for sure what she will have to pay. Hope this helps!
xx
Sorry but your story is a fairy tale. If you owned your own home you can't get a council house. You have to be on their list for at least 15 years before that happens. The only way the council would consider her is if she lost her home, then the council would offer her a place in a hostel.
You don't have to pay tax on the sale of a house if it was your main place of residence. You do have to pay tax if it wasn't your main residence, e.g. a buy-to-let property.
If the property was her sole living accommodation apart from stamp duty there should be no tax to pay.
you only pay capital gains tax on the sale of a second property (or more).
Your freind , has to pay capital gains tax
She can do a 1041 exchange and not claim the income tax.