Scottsdale Homes Real Estate
Is your present office in Birmingham no longer big enough to meet the requirements of your expanding business? Are you planning to purchase a new property and dispose of the old one? Are you sure you are aware of the tax liabilities associated with the sale of property? If you do not, be prepared to pay a huge sum of tax. You can avoid this issue by leaving the calculating job to a professional chartered accountant birmingham, who has in depth knowledge about property deals too. You might have knowledge about maintaining the book of accounts for your business, but that does not necessarily mean that you have information about different types of taxes. The moment you sell a property, you are liable to pay capital gains tax (CGT) on the same.
How much tax will I have to pay?
The value of your property increases on an annual basis, irrespective of its location. The valuation of the property depends on several factors such as its location (proximity to highways, malls, theatres, and so forth), its measurement, and its condition. The calculation of these three factors decides the index value of a property. Suppose you purchased an apartment, measuring 1000 square feet in the year 2000, and its index value was 2.5, the valuation of the flat will be 1000 x 2.5 or 2500. On this basis, if the index increases to 15 in the current year, the value of the flat will be 15 x 1000 or 15000 for this year. However, the index value does not reflect an accurate value of a building. Chances are bright that the value of your apartment is 50,000 right now. If you sell the apartment at its index value of 15000, there is no capital gain and you do not have to pay any taxes. However, if you sell the same for 50,000, you are making a net profit of 35,000. This is known as capital gain tax and this amount will be clubbed with your other income and you will have to pay taxes on the total amount.
Remember, you need not pay CGT for your private residence if you:
Have a single home and lived in it from the period you have owned it
You did not let out a portion of the same
You have not used any part of the residence for business purposes
The total area (the boundary) does not exceed 5,000 square metres
You did not purchase the property with the sole aim of earning money out of by purchasing it when property prices were low and selling it when prices are inflated.
In such circumstances, you will get tax relief known as private residence relief.' You can also decrease the taxable amount by including the fees of estate agents as well as solicitors who prepare the sale deed. If you add an extension to your building prior to selling it, you can deduct the cost of the same from the total taxable amount. While you can make a rough estimate of CGT using online calculators, it is better to hand the job to a reputed chartered accountant Birmingham.