Capital gains tax, marriage and property.

Tiina33

I am in a relationship with a man who owns his own home, and I also own my home. Last week I read on the net that if we marry, we would have to pay CGT if we sell one of our homes. (Somewhere else I read that if we sold one of them within 3 years of getting married, we wouldn't have to pay CGT, but no other site backs this up, so I assume we would have to pay it.) My home is in a not so good area and also has problems, and I put it on the market a couple of years ago (not because of a relationship, but to move) , but only got 2 very low offers from investors, the average being £15,000 below the asking price. (it was on at £79,950, but later reduced to £69,950 in an attempt to get a sale). I'm worried that, if I sell it in future, I will still only get very low offers, far below the asking price. What bothers me is that I have read posts from people who have sold their properties to relatives at a low price but have then been charged CGT on what the property is really worth. If I have to sell mine at a low price because noone makes me a better offer, will I fall into this trap, even though I'm not selling to someone I know, but am selling at a low price because noone will buy it at a higher price?

fengirl_2

It does not matter whether you marry this man or not, if you move in with him and then sell your house within 3 yrs, you will not be liable to CGT on the sale. if you let the property out while you are waiting for the market to pick up/decide whether you are going to make the relatinship work, then there is letting relief which exempts up to a further £40k of any gain.
If a property is sold at arms length, ie to someone not connected to you, then the selling price is the price on which the gain (or loss) is based. It is only when a transaction is not at arms length, ie to a relative, that HMRC would take the open market value of the property for CGT purposes.

Tiina33

Thank you so much for your useful reply. It has set my mind at rest.

Tiina33

As I wrote in my original paragraph, I put the house on the market two years ago and have lived in it ever since and am still living in it now. It has been on the market from then and is still on the market now. It's possible that I may in future marry the man I am seeing, but would the fact that the house has already been on the market for two years now count as part of the three years you are allowed to have to sell a house in without paying CGT or would the three years only begin from the moment I either married him or moved in with him?

fengirl_2

No, because the house is stll your main residence. The 3 years begins when you move out.

pjcox2005

Just to put your mind at rest further and as I think you seemed confused in your original post, capital gains would work as follows:

Should it be your main residence then you would receive principal private residence relief and any gain would therefore not be taxable.

If you move out to a new home, then you still have another 36 months from this date (as stated by Fengirl) where any gain arising would not be taxable.

Should you sell the property after this point for any reason (without moving back in) then a proportion of the gain would be taxable based on a fraction which effectively is length of time property isn't main residence over total period of ownership.

The capital gain is basically proceeds from the sale less original cost (although you can also take off costs incurred from selling/buying and improvement costs if they meet the criteria).

You also have a personal allowance in the year which removes some of the gain (currently £9,600).
I
'm assuming with all those things considered and the current position of the housing market (you noted that you had already reduced asking price) I would have thought it unlikely that a tax liability would arise (although obviously I don't know the full position).