Capital gains tax is a tax on the increase in the value of assets that have been sold, depending on the day where they were bought and then sold. The law governing capital gains tax is the Chargeable Gains Act 1992. Land stamp duty is a tax imposed on a property owner when their property exceeds a certain amount of money. In this essay, I will shed light on Capital Gains Tax and Land Stamp Duty and the implications these taxes will have on Trisha. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay 1965 was the year when capital gains tax was first introduced. And this was done on the sale of assets. Thus, the tax is applied on the monetary difference between when the asset was purchased and then sold. It looks at the value of the asset in the market when it was first purchased and then when it was sold. Expenses that increased the value of the property can be deducted. The person responsible for paying capital gains tax (CGT) is the person who sold their property. However, it is important to note that certain things are tax exempt such as the principal residence (in this case; the Elm cottage which is Trisha's principal property); cars and motorbikes and any property acquired before September 1985. Key legislation regarding capital gains tax is available on the government website and provides us with an example of how capital gains tax -values ​​is calculated; “You bought a painting for £5,000 and later sold it for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).” The government is also proposing different ways of disposing of property, which would mean the taxpayer would have to pay capital gains tax. gift the asset to someone, or transfer it, exchange it for something else and get some sort of compensation. Private residence relief is one way a property owner can avoid paying capital gains tax. This applies if you owned a home as the first homeowner and spent most of your ownership time there. In this case, Trisha did not live continuously in the Elm Cottage because it was not her primary residence. “Private residence relief allows most homeowners to sell their homes without being liable for any capital gains tax on property profits. Private residence relief can also help you reduce your capital gains tax liability when selling a second home or selling part of your garden. It is important to note that there are several conditions to be fully entitled to private residence relief; “The dwelling house was your sole or principal residence for the entire period of your ownership. You have not been absent, except for a period of authorized absence or because you lived in work-related accommodation, during your period of ownership. The garden or land, including the buildings located there, does not exceed the authorized area; no part of your home was used exclusively for business purposes during your period of ownership. » However, if all of these conditions are not met, partial relief may still be granted. Courts have placed emphasis on the term “residence” when addressing the issue of private residence relief. They suggested that the term could include parts of the main building, for example the garden.As previously mentioned, there must be some degree of occupancy of the property which could be subject to capital gains tax. Occupying in this case requires a certain level of permanence. For example, in Trisha's case, since she has only lived in the Elm cottage for 2 years, she then rented it out. It will be exempt from private residence relief. But she might be entitled to some relief. However, capital gains tax will apply to the property she plans to sell with the money she receives from Elm Cottage. As this will be a rented property. On the other hand, according to the latest government publication concerning capital gains tax; let the relief apply where a taxpayer rents out their entire main residence/former main residence or even part of it as accommodation. Rental assistance came into force in the 1980s when the government encouraged people to rent extra or unused rooms in their property without losing primary residence assistance. For example; if “Susan bought a house for £200,000 in 1998 and sold it for £350,000 in 2018. Throughout this period she lived in the house as her sole residence, but rented out two spare rooms amounting to 25 % of ownership to tenants who had exclusive rights. the use of their rooms (and their rooms only). The PRR would not completely remove any subsequent CGT charge on the property. Rental relief would apply as follows: Susan made a net gain of £150,000 when she sold the property and is entitled to claim PRR on 75% of the property, which covers £112,500 of the gain. The part of the gain attributable to rental and not eligible for the PRR is £37,500. As rental relief is payable on the lesser of: • The PRR amount (£112,500), or • £40,000, or • The gain attributable to rental (£37,500), the rental amount "The rental relief due is £37,500 and the entire gain is exempt from CGT." For Trisha to avoid paying the full amount of capital gains tax through rental relief, she will need to live in The Elm Cottage for at least two years before renting the property in which in this case, it meets the conditions. Trisha will therefore be eligible for rental. Relief. Additionally, other properties Trisha is considering purchasing could be subject to Land Stamp Duty if they exceed a certain amount. This tax can be imposed on both freeholds and leaseholds. Since Trisha is planning to buy apartments; These are generally leasehold properties when you acquire them for a certain period from the landowner; who is the person who fully owns the land on which the apartments are located. “The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties. » Land stamp duty must be paid within 14 days of purchasing the land. Having representation such as a solicitor or conveyancing agent makes this process easier as they will conduct this process on Trisha's behalf. As Trisha is not a first time buyer of a property, she will not be entitled to stamp duty and land tax relief. However, if the lease term of the apartments Trisha is considering purchasing is less than 7 years and the purchase amount is less than the amount specified for the non-residential or residential property tax threshold. The current amount is £125,000. The calculation of Land Stamp Duty is based on the type of lease existing (the assumption that the property is a leasehold is based on the nature of the typical purchase.